An accident due to a defect in the property could be a disaster.  

As a developer you'll want to insure against future homeowner lawsuits for construction defects (HOAs are famous for litigating this type of stuff) and this insurance is costly.Finally, there is the entitlement risk. 

In other words, you should still have your closing attorney get title insurance (for you as well as your lender) and run things as you would on a normal transaction but the bank itself that owns the property should be able to properly convey the property and handle anything that comes up on their end because any defects will have to get dealt with eventually should they not want to hold the property on their books and be able to sell it on the market.

For example, you can replace a broken or defective outlet without a permit however if the current outlet is fine but has too much paint on it you need to pull a permit...Good luck with the project.

They make blanket statements stating their seller has no knowledge of any defects. 

Ask the contractor to check and see if there are any units at their supply house that may have some physical defects which you may be able to get a discount.

@Preston Brown  Another piece of info to consider when buying a condo in Colorado is the recent changes around multifamily defect lawsuits in Colorado.  

Some walls had very minor defects and some moderate.  

He should have no problem selling his home on the MLS (barring any major defects).  

If you discover NEW things that are not nickle-and-dime time-wasters, but legitimate issues, then you renegotiate price based on material defects that were not disclosed.