Personally, I would eat the money up front to get someone on schedule asap and work with either the bank or the seller for a credit at close.If there is roof damage, that would be an insurance claim on the current owner's policy. 

The nice thing about real estate investing is that there are SO many opportunities and strategies to help support your short and long term goals.

Also file a complaint with the CFPB Submit a complaint | Consumer Financial Protection Bureau (consumerfinance.gov)Regarding do you have any legal action - you can prove you do not owe it but you will not get any compensation - courts have ruled long ago the only recourse you have is actual money you lost - there is no "pain and suffering" if a statement is incorrect and you have to fight with them on it.

Follow the money.

Would you lose a large chunk of money?

Now the county is threatening to take the General Contractor license unless the money is reimbursed 😳!  

Only loan that would cover your rehab is an FHA 203K (primary residence loan) OR hard money fix and flip loan and you would have to refinance later.

Go ahead and be willing to put in the money toward a good contractor if you're not doing the work yourself.

Know of an efficient way to identify hard money lenders that will solely focus on an 80K loan against a property purchased at $256K with me bringing the rest of money to the closing table?

Long story short: conventus has turned over servicing to shellpoint.