It's likely that they'll make money just on flipping the houses in many cases and even in the lemon case it will not be a total loss. Even in the very worst case, where the house absolutely cannot be salvaged, the lot is worth something (I think the lot is around half the value of my property, for instance). If the house just needs more extensive repair than expected that's a smaller loss.

From the perspective you're talking about, the risk to an individual buyer of missing some serious issue in an inspection is far greater than it would be to a company buying up homes left and right, and they've minimized this risk by focusing on a relatively specific slice of the market (newish houses with no serious known issues and with a value of $250-500k).