" I'm struggling how this was not flagged during city and closing inspections and/or why they chose this termination point? pros/cons?" I'll attempt to answer your questions --and in reverse order-- which I think will provide some context.

Gases vented through exhaust openings in proximity to intake openings can result in the exhaust gas being unintentionally pulled into the home. In the case of your dryer vent, the concern is the potential for combustion gases to be pulled into your home if the dryer is a gas dryer, and moisture from any exhausting type of dryer.

Inspections are a "sampling." As such, there is no guarantee that code compliance inspectors will catch everything prior to issuing a certificate of occupancy. Here in Virginia, builders are obligated to correct any code issues identified during the three-year period following completion of construction. Check with your local building department so see what obligation, if any, your builder has to correct the issue.