It's very likely they saw the inside condition of the unit before you purchased it and they have the right to inspect.

You’ll need to submit an application to the Community Development Department, undergo inspections, and comply with tenant notification and eviction rules, including providing a 90-day purchase option and relocation assistance.

Always do a home inspection from an inspector you hire.   

It was a flip sold by another local agent, didn't need inspection due to my husband and biz partner being a contractor, negotiated price down.

Is it like the following:a)  Make an offer on a 5-unit that the Seller acceptsb)  Do my inspections, come up with gameplanc)  Present the lender with final gameplan, once approved then proceed to closing & get the keysd)  Have XX days to convert to a 4plex?

Many of the properties I have been looking at have issues but in this case I'm working with the seller to let me get it up to conventional appraisal standards before they inspect it.

The inspection report did not mention many of the expensive repairs I'm facing.For one, one of the units cannot even be rented until I spend at least $10k getting the electric up to code, among other repairs, so its been sitting vacant.

There were many challenges that came about after the inspection; from outlets that were not up to code, possible water leaks above the shower head in the ceiling, water pipes from bathroom vanity was the same as kitchen sink with no shutoffs, etc.

We came in all cash and waved all inspections and contingencies.

He did an inspection and said there are some coding violations too.