Sellers grind back on price a lot, plus they often don't disclose latent defects that they know about, and we also have to spend our own money on legal fees to get title issues worked out that the seller's families couldn't work on on their own.

I think you could see a 20% fall in rents for properties that compete for those tenants.Of course if legislature changes the construction defects laws we could see a bunch of condos in the market.

The loan is defective.  

If the notice you served upon a tenant is defective, that may delay or complicate your legal proceedings.

You could buy a property with liens and title defects and lose all of your money. 

I call repairs (which I didn't list above) to include service calls, inspections, replacement of old/defective smoke detectors, appliance parts/repairs, floor/carpet cleaning and repair, broken fixture replacement, rekey service(s), HVAC service calls, labor (painting, drywall repair, handyman svcs, plumbing services, etc.), tool rental, supplies/raw materials (paint, caulk, ...)

I know of several folks that have tried to locate properties with significant structural defects and purchase those properties at a discount and them repair them for a profit.

A home inspector might not make much effort to call that stuff out either, since it's technically not a "defect" and is usually fairly obvious.

I repair the defective appliances myself then have them as spares or junk them if they are not worth repairing.You can usually by appliances 5 years old or newer for under $200.

They also can't be responsible for anything hidden in a wall or buried in the ground since there is no way to visually inspect those areas.To sue and be successful, you would have to prove that the inspector should have known about the defect or deviated from the professional standard of care in the course of the inspection.Inspectors carry insurance for these issues, but if you read the standard contract, the most you would expect to recover would the fee you paid for the inspection.