If they do deny liability I would first review the contract for sale and purchase and the deed and see if it excludes outstanding utility bills and code enforcement liens from liability and shifted the onus for confirming their status to you the Buyer. 

Each inspector is different, many are good, but some are not and each has their own interpretation of the code. 

This part of the tax code says that if you live in a property for two of the last five years, you are able to sell the property without any capital gains tax up to 250,000 if you are single or up to 500,000 if you are married.

I'm my area I can call code enforcement and they can put all occupants out in 24 hours because house is not habitable without utilities turned on.

Unfortunately if you are within code and city says it can be there, then there is nothing he can do.

To manage a rental property DIY I assume you mean doing fixes on your own, but that can be very dangerous because you don't want to spend multiple times for the same things and get those calls because it wasn't done correctly or to code.

Absolutely no way...if you want to be in the vacation rental business, jump in - but why would you allow the wear and tear on your property, the potential code/zoning enforcement issues that can arise, the risk of being cancelled by your insurance provider and more. 

In my previous county the winter temps meant that county code required an extra supplemental source of heat (electric whatever or a wood stove) as the heat pumps wouldn't heat a room under a certain temp.

(My criteria consists of SFR houses between 200-300k)Hoping for some recommendations on specific areas/Zip codes to potentially find a cashflowing deal, while still staying in a neighborhood that has lower crime + good schools. 

I know if more than 50% burns or destroyed the whole thing has to be brought up to the current code.