One compromise that comes to mind is to tell them they can do it but they each have to continue paying what they are currently paying until both units are rented or their lease expires, whichever comes first.

You have the right to enter any room in YOUR house, provided you give the tenant notice that you will be entering, unless it is an emergency, then you can enter right away. you have a right to those keys or to have the tenant remove them. if this tenant is so paranoid maybe a compromise of installed entry door handles on every door so that they are keyed alike. this way the tenant has locking doors and all you need is one key to open them all.

Compromising integrity should feel greasy and it's an attempt to make up for a lack of competency.

I personally wanted to do a 4 plex in a war zone for 2 years, but my wife wanted a single family home...the duplex was our compromise and it has worked out well for us. 

House is on septic, I’m sure this plays a part into this. 2) would this non-permitted situation compromise our finance plans?

Renting to your friends will just put you in a compromising position where you are forced to make inappropriate business decisions based on emotion rather than the most financially responsible way to run your business. 

Independence is compromised when a borrower recommends an appraiser or a person to perform an evaluation.

-Formal asbestos testing protocol-Working with architects and engineers -Removing trees and "politics" associated with it, even if the trees are compromising the houseMore to come!

Coded as either poor or sealed/structurally compromised condition, owned for 30+ years, tax delinquent, mailing address different from property address.)

You're looking for any large deferred CAP EX items, anything that compromises the structurally integrity of the home and anything that is a safety hazard.