I overlooked my inspector and municipality being a complete nightmare and making cosmetic issues a priority over the actual safety and livability of the property.

. - I am not worried about safety issues with this one, but what other considerations do you suggest when approaching the owner?

They are sold AS-IS and I got hit with a health and safety issue for damaged sheetrock 2 days before closing.

If you don’t believe it, here is my detailed estimate, assuming a 6 month flip (click to expand).No one should be doing $250k deals in expectation of a razor thin $16.6k profit and you shouldn’t be doing loans like this.

I was renting,when the house fire happened,Fire Dept investigators red tagged it,owners remodeled,from insurance money then sold over a million,never told buyer it was arson,until arsonist returned trying to get it,who is my son awaiting prison,I finally have a place ,home owner told me I can't use him as reference because he didn't want to lie,yet lied to buyer who is now terrified and didn't know ,is worried about safety for her family,,owner never disclosed?

Safety?

They supercharge their returns by maximizing leverage and placing as little value in equity as possible, very little factor of safety.   

I'd prefer to build in a larger margin of safety by removing this fee.

Unless Buyer exercises the right to terminate granted herein, Buyer accepts the physical condition of the Property and any violation of governmental, building, environmental, and safety codes, restrictions, or requirements, but subject to Seller’s continuing AS IS Maintenance Requirement, and Buyer shall be responsible for any and all repairs and improvements required by Buyer’s lender. 

It is also possible that the work was never done to code, even by standards at the time the work was done in which case it could be a problem.There are things that could pose a safety risk or could lead to more expensive repairs in the future.