Or is it just “be afraid of this thing you can’t prevent, and can’t avoid”?    

B. prevent my brother from moving in & turning the house from a cash flowing asset to a liability costing me money?

A little proactive education can easily prevent injuries and damage in some circumstances, but you should generally cue off of innocuous questions or comments, rather than making assumptions, unless a caseworker has suggested they would be unfamiliar.

I do not want out of the deal, as I've already secured insurance and funding for the rehab, plus it's a good deal, however it's unknown at this point how much time this could add to the process,plus I feel like I should be compensated for the inconvenience for tying up money and preventing those funds from working somewhere else.

on the other hand because of pressures for europe the fed may cut rates to prevent a global recession, but again i dont know what will happen. but if prices dont go down and they go up when you move now the price is over 1mil you will have to deal with "res a" property tax which is a lot higher than regular residential tax.  

These loans cannot exceed a certain amount in cost and fees which was implemented in the Dodd Frank act of 2009 to prevent lenders from excessive fees.

@Brandon Beardtyes plan is to buy mf property first, however its still hard to find cash flowing mf in sf bay area.and need to add couple busniss vehicles under sec 179 this year, so its getting tricky. hoping to get vehicles under business credit, or in worst case buy them in cash and get auto loan on vehicles after buying mf property, to prevent low DTI situation, only thing it will reduce my buying limit on mf property due to less down payment.

What can I do to prevent a big problem?

Do you know if an unpermitted structure would actually prevent title from issuing extended coverage? 

Based off the photo, it appears the parking area is also in the front, which as part of 'Tenant Proofing' I would add some sort of railing or fencing to prevent tenants from parking too close to the property.