Her loan officer then changed it to an FHA loan and we signed a 30 day extension.

Then the banks will require details on the scope of work performed.

I would send notice rescinding both the offer to discount the price(Could be interpreted as an option ) and the 3 month extension of the lease(It is not valid until signed by the tenant and delivered back to you).

My advice is to stay away from commercial property until you understand how it's valued, and can perform a proper due diligence and valuation.    

You will be the new owner, but still perform a title search as there may be unforeseen additional issues.  

If the testing was performed by a home inspector, hopefully they are Registered Radon Testers with the State, and if so they are required to report it to DHHS on a monthly basis.  

What I would want to do in that situation would be take the performing asset to the local bank, get a 6% interest loan with a 15-20 year amortization, and then go to private money/HML for the rehab project, then refinance it when it's producing. 

As I am moving along in my education on RE I am starting to see a major need to track local market performance.

Pay to perform is the way it should be.

@Christopher DeitzI live in LA, I think master leases are a great idea, shoot for $500 a month positive, use a performance lease, owner gets paid when Rei gets paid