Vendor /Real Estate assure me that the property is legal because it has a certificate of habitability (Cédula de Habitabilidad). Is that right?

No. It is true that today a new property does not have a certificate of habitability (Cédula de Habitabilidad) if it has not been built legally.
But an old house can have a certificate of habitability and be illegal.
a) or because the illegality was committed after obtaining the certificate.
b) or because it has no open urban infraction file, the infraction has expired and has obtained the cédula.
The cédula certifies that the property is habitable, not that it is legal.

Vendor/Real Estate assures me that the property is legal because the infringements are prescribed. Is that possible?

No. The prescription of the infringements means that the Administration has lost the right to order restitution (demolition).
However, construction will ALWAYS be illegal.
That means that you can never ask for a reform or repair license on a construction that is illegal.
If one opts for doing the works without license the term to count the prescription starts again.
It is important to be aware that in protected areas infractions never expire.
In common rustic soil, infringements committed after January 1, 2018 are also not subject to the prescription.

I’ve been told that demolitions are not ordered on Mallorca. Is it true?

It was true. In the past. From 2016 until the first half of 2018, the Agency for Urban Discipline (Agencia de Disciplina Urbanística) ordered in Mallorca a total of 158 demolitions and put fines of 5 million euros.