The inspection report should pick up some but not all deficiencies. 

As in my lease I also have the tenant has 7 days to move in and conduct a Inspection of the premises and to note any deficiencies or inoperable appliances.

Usually they will demand a premium over their recourse offering.The issue with recourse is obvious: if the property cannot repay the debt, the bank will look to you, the guarantor, to cover the deficiency/shortfall. 

Dealing with end buyers directly exposes the bank to risk, especially in a deficiency state.

The deficiencies in a failed deal of that size may be larger than your net worth. 

Of course, you can also deduct any other deficiencies you were left with as a result of the tenant such as rent for the vacant days.

If original borrower of that debt is being pursued for a deficiency balance from the subordinate lien holder they often can be settled from my experience. 

@Davido Davido You've referred to a consumer debt collection statute... which concerns a legal (money) remedy such as collecting on the note or a deficiency.

The home is currently listed on the MLS but I'm at a loss on what to do as I do not have the funds to cover the mortgage deficiency and closing costs.

My friend is conscientious and spent another year "fixing problems" at his own expense which were mostly due to design deficiencies.