IT might have been better to dig deep and pay the vendor now and save your headache and renter frustration and relax over the next decade, with proper maintenance of course.

Proper notice to quit or pay gets attention most of the time.  

Most people's lifestyles do not come anywhere close to using that money on an annual basis.I find younger want very high yields to try to grow money from 100k, 300k, 800, 1 million and up and then ramp down after they have made it.

My questions is do I submit a an offer planning to pay all the fines myself (much lower than the current asking price) or do I submit an offer contingent upon Fannie Mae paying the fines current so that I'm only responsible to pay the ongoing fines until the work is completed with the proper permits. 

In the beginning you might be cheaper but will have growing pains as you expand and will not be able to scale and maintain that little profit margin model.Personally I think many buyers overpay for investment properties and then blame the PM when they did not properly account for that expense going in.

Mountain properties are great for lifestyle, but I've invested up there and have always experienced negative cash flow.  

 @Eric Fernwood:I definitely agree, this sounds like it require a proper cpa/lawyer opinion.

Sounds fishy and sounds like they don't have proper documentation for what you are claiming.

I have seen a few rookie investors hiring people that say they have experience and the next thing you know, they paid for a roof that now needs to be removed and replaced because it wasn't installed properly.

That leaves:1) Taxes: is the property properly assessed?