Dear Joe,
You may want to consult with another attorney for a second opinion. You have a lot going on and there are many different pieces to the puzzle.
Good Luck,
Sharon Kozinn

Joe: There is a state code but it is adopted and administered by local municipalities. Obviously, from your statement, you have sought counsel. Therefore, you are beyond any interpretation of the situation that a realtor might piece together. You may have the wrong attorney but that is your problem to evaluate and solve. (See sentence above.)

Finally, you ask if you can sell a property with violations. Short answer: YES, with disclosures and with the buyer assuming the responsibility for the remediation required and the municipality's allowance of the same. In this market, you may just as well default on the mortgage. (It's not a capital crime.) Also: How on earth did the mortgage company allow you to HAVE a mortgage on a house that was still under construction? Your attorney may have a case there as well. While you can sue anybody for anything at any time, if your realtor was not aware of the condition of the property or disclosed it, it may do you little good to take action against the brokerage. Realtors generally only know what the seller tells them. They are not usually required to get a CO inspection to represent the property, the seller is responsible for that and then either fixes the problems or turns them over to the buyer, who is informed of and accepts the situation. (Or, of course, runs like hell because the end result can be exactly as you describe.)

much of what you say makes little sense. If the house is 4 yrs old and then it will be covered by the new construction warranty. If the builder went out of business then I think there is a state run slush fund to cover this. Did the town sign off on the construction? If so then the construction had to be to code. If you bought it as a resale did you have a home inspection? If not why not? If you did and the inspector failed to note the faults then you have a case against him.
If it was a resale was it sold via Realtors? You should have a case against them as well.
It is the town building code not the state. Unless the property has been condemmed by the town I am still unsure what it is you are rying to do. A lawsuit against the builder should not be bankrupting you.

Joe,
There is not enough information there to answer your question but even if there were - I wouldn't. My suggestion is to talk with a real estate attorney. If you have legal expenses I assume you already have an attorney but I don't know if they know anything about real estate. By the way, are you sure those violations are state and not county or municipal?