Giant Headache

[Kin Hei Lam]

Hey  Everyone

I've been trying to buy a house for a while now. Recently this June, I saw a detached 2 Family house in Woodhaven, New York. The Seller is an investor and he didn't want to use an agent. My brother and I go to the open house but when we get there he cannot provide access. We spent about 20 minutes talking and he specifically said he can deliver the house vacant if we wanted and he can show us his bank statements for the last 18 months to show that his tenants are paying on time (the tenants currently don't have a lease and have a month to month agreement). We exchange contacts and said we'll keep in touch to set up another appointment. His asking price was 650K non-negotiable (a little high bit still reasonable). A month goes by I keep checking in periodically and still nothing. It wasn't until the end of July that we finally set something up, and he didn't even show up, he had his first floor tenant let us in. We saw the first floor and the basement, we did not have access to the second floor. From what I saw I felt comfortable enough to make an offer for the full amount. 

We get a copy of their butchered statements (because they've just been depositing into their personal account instead of a separate business one) and felt very uneasy about the second floor tenant. We went back to them and said hey your statements aren't satisfying we want it vacant instead. There was a bunch of back and forth and what it came down to was they can delivery the first floor empty, and they wanted to raise the price by 30K to vacate the second floor. I didn't want to waste anymore time so we agreed to only have the first floor vacant (I planned to get rid of the second floor myself if they  turn out to be a problem). It is late August by the time we finally signed the contract with a 60 day time frame. There are a few outstanding DOB violations on this house, a previous landlord had illegally converted the basement into a SRO. Long story short, they got rid of the SRO but the violate wasn't cleared with the DOB. My lawyer put in a clause for the seller to correct any outstanding violations because it maybe an issue for the bank.

About a week goes by and I get a call from a very angry appraiser, long story short, they agreed to see the house on a Saturday and the seller was a no show. This holds everything up for a entire month and my mortgage company had to hire a different appraiser during the process. Things get going again, my mortgage broker locks in my rate and my lawyer orders a title search. Then last week my lawyer gets a fax from the seller's lawyer saying that the 60 days are up and is threatening to send the contract back. The title search came back last Friday and all of the outstanding violations are still there. I can bring up the violations and pretty much cancel the contract and get my down payment back, but I want that house. The violations aren't an issue for me, I have architectural background, the basement from what I see is already pretty bare, at most I might have to take out the bathroom still in the basement, file papers with the DOB and get an inspector in to look at the place. So its only a matter of time, money, elbow grease and headache from dealing with the DOB for me. Though the violations might be a huge problem for the mortgage.

Any thoughts? and options i might have?