The due diligence period IS the escrow period. All sales are 'as is'. You can't just put 'clean title or deal is off' since he may have no idea... a title search is a complicated thing... that's why title insurance exists, because it is so complicated. Besides, if he could put 'clean title or deal is off' then why stop there? Just put 'no problems of any kind or deal is off.' Home inspection will be set up by bank or someone else who is independent.

You are missing the point. Yes title or structural are separate from financing, but those are just two potential problems that could result in a bank NOT granting the loan. If he signed an agreement putting down money and saying that he is buying without a mortgage contingency, then he is screwed unless he can get another source of financing fast or finance it himself. (Escrow not closing is plenty frequent) If he does neither, he broke the contract and loses his downpayment. That's how it works.