He totally wants me to remove the portion about the property being "free from hazardous substances, and from violation of zoning, environmental, building, health or other govt codes or ordinances and that there is no material or other known defects or facts regarding the property that would adversely affect the value of the property."3. 

Roof needs to be replaced and about 2-5k of other defects.

There's a reason they do it this way - and that's to avoid providing/paying for a title policy to the buyer and to avoid paying off/correcting all the title defects/liens that exist. 

IOW, this covers you, the owner, to bring the property to complete if faulty workmanship, defective materials, carelessness, or accident occurs.And another (while I am at it): Automobile Liability What if a vehicle backs into your building?

Home warranty will replace something defective inside your home, but not something defective outside your home and not pay for associated damages, so not worth pursuing.

It is a duplex I would be financing, however I just got the home inspectors report back and there are some things on that report listed as defective that make me concerned.

Also, don't transcribe that list inside the potential home with the elevated levels of CO (that stands for carbon monoxide and it can kill you) and likely represents a defective gas appliance.

This material turned out to be defective, and needs to be replaced in any rehab property.

If you lie, that could open you up to future liability; if you tell the truth, that could limit your buyer pool (a lot of people don't want to buy a house if work wasn't permitted);-  Worst case, down the road, if there is a defect in workmanship that results in someone getting injured or killed (electrical fire or gas leak, for example), you could potentially be held criminally liable and/or find yourself getting sued.

My contract is pretty clear that all appliances and any damage to them is a responsibility of a tenant except when defective.