In my state of CA at least, negligence/violations of fiduciary duty are one of the biggest drivers of lawsuits that take agents out.

its a problem in the sense that its not up to code and resale will be an issue - as you mentioned. .. also it could have risk in terms of a tenant landlord situation where you knowingly are renting out something thats not to code so in a situation of peril it opens up the negligence etc...now with that said.. you can always see what it will take to make it conforming...LA has  TON of non conforming illegal units throughout the city

The revenue will be negligible.

Sounds like if it's just $100 then the tax impact is negligible.

It says "if the premesis...are rendered wholly untenantable by...casualty not caused by..negligence of tenant, agreement shall terminate...".  

I mention that anything from their negligence they are responsible for.

Any possible negligence by the owner could snag the realtor /management person - this why people aren't intereated.  

So why shouldn't the lender be liable for being negligent.

Its no longer a good deal and I'm getting a negligent owner vibe which makes me think they'll be more surprises along the way.Am I wrong for thinking the structural stuff and electrical stuff that came up on the inspection should be addressed?

Any actual risk mitigated effectively by such a plan is often negligible depending on the situation.