However, if they are still considered a short-term guest under lodging rules, you may have more flexibility, though the specifics can depend on local regulations in Seattle.Since this can become a legal gray area, I recommend documenting all agreements, payments, and communication with the guest.

>If you rent that out without a true Certificate of Occupancy, a tenant can sue you for ALL of their rent money back. show me any law/regulation that states this.  

PA is super regulated state and not a state i recommend doing seller financing in.

You can easily report them to the regulators if they do something fraudulent and can pay fines and/or have their license revoked. 

The government has regulated their hours of work to 24 hours a week rather than 40 hours.

NOPE  these are not federally or state regulated loans or lenders they owe u NOTHING.

I have never dealt with an investor who didn't physically go to the property & most look up zoning regulations before even giving me an offer!

Ok, well now STRs are regulated in that city, and that same income approached value plummets since the home can only be rented as an LTR.

Make sure you know the regulations. 

You're buying a specific property, in a specific location, in a specific condition, subject to local rules and regulations.