you should issue your local equivalent of a 5 day notice to quit or vacate, and if the issue is not remedied, move for eviction. they are most likely not going to get rid of the pet and wont stop smoking in the unit. at best, there will be a temporary change while they wait for your to let your guard down.

So I'll need to remediate that to save the deal.

If you're going to touch the walls in any way (Sanding, cutting... anything, really), and asbestos is present, you need to properly remediate. 

Foreclosures are a natural remedy to defaulted mortgages.

The remedy would be to enter the case and file a motion for relief from stay.

Was there any discussion about the chemical remediation techniques that popped up a few months ago?

Unless, there was some sort of mold remediation that previously had to be done or something major. 

Between the levels of Contractors license and if each person needs a license, that is just way too much for a homeowner to follow through on....Only exemptions are actual licensed professions, e.g. electricians, plumbers, radon remediation, etc.Oh, in NJ the HIC registration is good State-wide as is the licensed professions. 

In the even of he buyers default the deposit shall be the sole remedy

When the developers I have worked with do a tear down a place with asbestos and other things costs much more to demolish.You would think you would just tear it down but they want all that remediated and removed first so it doesn't go airborne during the tear down.Building cost 5 years from now is impossible to speculate.Labor and materials could be way up and LEED demands might be a requirement then.Can an additional level be built on the existing structure if it is beefed up at the bottom??