The house is around 5000 square feet.  

If this buyer walks, you are back at square one.

And please forgive me, if your lender is "too busy"....that is a huge red flag to me. 

You'll have no problem using an FHA loan for example in a rural area, but might have trouble in a red hot area like NE Minneapolis since sellers don't want to deal with the headache of inspections, regulations, etc when they can get asking price in 2d from a conventional buyer.

It means you actually screen them and look for red flags that would indicate they are problematic.

We're underwriting a 21 unit package in the highlighted red area in L/A aiming to apply the same approach.

If there were multiple offers on this house, you should be glad nothing major was found and move on.However, just an FYI - if there was not multiple offers on this property (minimum of 5) for a house in Madison proper with a price of $170k, that is a major red flag these days. 

When you look at a specific property, use the rents within the same micro market, or "squares" on the checkerboard

The home is a 1600 square foot, 3br/2ba SFR on a 1/2 acre lot with attached garage in the 34746 zip code.

By the square footage of the unit?