Your property sounds to be more unique, therefor likely making it challenging to find acceptable comps. if the property is common for the area, it's likely this could be a non-issue with the right lender. 

Have them pay for it and tell them you will reimburse them if there is a structural issue to the exterior sewer line. 

I have gotten a permit for an STR in the county before and was pretty easy. 

Credit score shouldn't be an issue.

However, if you're using a discount company that's allowing you as the owner to set the rent price, approve or deny apps, etc. then your issue could be one of many things. 

What are the city code and permit requirements if any?

The builder admitted they provided inaccurate information, and they proactively helped the home buyers affected by this issue to get exceptions allowing us to build a fence and plant shrubs on top of and beyond the easement line (but we still can't plant tress). hence, they refused to reimburse us furthermore. 

However, for the seller to net the agreed price, the price has to go up in which case you can run into the issue of the property not appraising.I think the fundamental issue is this requires a more sophisticated buyer and seller (especially to have a graduated commission scheme which is common in commercial). 

Now though, it’s a real issue because it’s affecting my rental income.

Although we didn’t have a move in move out list at the start of the lease, we have all the communication from the beginning to prove that they reported every issue and we took care of it.