We're in the process of purchasing a house. The inspector says the 20 amp breaker with 15 amp wire is a fire hazard. The homeowner/seller, who's dad is a retired electrician, says it's fine. W'ere trying to determine if this needs to be addressed/changed or if it's OK to have 15amp wire with 20 amp breakers.

NO!
This is not acceptable, it is a code violation
And the current owner is responsible for
Fixing it.
All they need to do is change the breaker...

I really do not believe this, I'm actually going to agree with an inspector on this one. Not only is he correct but the owner's "electrician" is a flat out liar and he must know it.

14 AWG wire is listed for 15 amps. A 20 amp current will cause the 14 AWG cable to heat, melt the insulation and then cause a fire.

Also, as said above it is the homeoners job to fix it. I would be wary of this home simply because they were so willing to lie about a trival repair, what else are they hiding particularly if the inspector did not pick it up on the pass through the home.

No it is not okay, the breaker needs to be changed to 15amp.