However, after several unsuccessful calls from the servicer (including them erroneously marking the number as disconnected), I reached out directly and the borrower has responded.

There is a common erroneous belief that if a property is "really improved" it will sell for more than what similar homes have sold for.

It also allows them to contest future reports erroneous information.

From being a lender and also the consumer, I always like to err on the side of transparency.

I err on the side of not stirring up trouble because a few bags of garbage is nothing compared to what could happen if I call them out on it.

If so, kindly let me know which of my assumptions are erroneous. 

If the project you're buying has some salvage value in the event you can't get permits perhaps the answer may change a bit, but I would err on the side of being safe and passing if you can't get what you want to make you feel comfortable with buying the lot.  

Their information can be very slow to be updated, erroneous, or blantantly misleading.

But err on the side of caution, if your costs are lower, great, have a party.

Are you saying that the local government may have made a mistake and erroneously billed you for taxes that were already paid?