She buys a habitable house through FHA (minimizing the down payment).

But the law also allows the tenant to waive the right to receive these notices.As for your repair issue, there are few points to consider.First, you should know that all PA landlords give an "implied warranty of habitability" to its tenants.

I'm agree that cost of doing such work during the rehab does more harm than good, the initial cost savings is there but once I factor in the opportunity cost of missing other deals or doing it Instead of more important task then the savings is a negative.

How to Win Friends and Influence People6. 7 Habits of Highly Effective PeopleThere's a lot more I could suggest (I read a book a week), but I'm keeping to the realm of real estate.

Backing out is not a good habit to get in.

I would be worried someone would file something against me for having tenants in a house unfit for habitation. 

In this scenario, is the wholesaler "harming" the owner?  

I think a big piece of the equation is to know your own spending habits.

@Evan Jarvis When I have looked up ceiling codes in the past it always comes up that minimum height is 7' for  Habitable space, hallways, bathrooms, toilet rooms, laundry rooms and portions of basements containing these spaces shall have a ceiling height of not lessthan 7 feet

According to my mortgage broker, there are many alternate lenders which will allow 10% borrowed down payment.There are a few more stringent factors, I wasn't able to find any alternate lenders in smaller communities, and they were not willing to lend on properties which are not readily habitable (undergoing or in the midst of construction, "refreshing" the property was fine)Rates are also higher.