The agent explains to the occupant that it's just a formality.

If you are unsure of the implications, ask for time to have an attorney review and explain them to you.

I agree with Jacob that if you find a good deal, doesn't matter how the market is doing, especially if you are looking for long term investment and cash flow is your primary objective.    

And don't be afraid to ask questions, read @Craig Curelop new book on House Hacking if you get a chance:)And try to keep on blinders when it comes to shiny object syndrome, the most important thing you can do right now is sit down with a lender, understand how much you need to close with, find your market, find your agent, and educate yourself.

Talk to them and explain that this is not acceptable as you have a home warranty that will cover the repairs. 

That mortgage stays where it's at and you should attempt to make payments so that they won't foreclose on you.Does that help explain things?

When we explained our desired to occupy one side and rent the other side of the duplex she informed us that we would have to have two separate mortgages one requiring the 5% for owner occupied and the other requiring the 15% as an investment property.

Stay objective!

Just explain why the numbers don't work for you and find the next one. 

Could you explain further?