2nd counter offer the owner now wants an As-is purchase. Help!

[Kurt Robert]

I am in the process of buying my third rental property, but during the negotiations we ran into a snag.  The seller, on the second counter offer, now wants to sell as-is as he doesn't want to fix anything.  They have come down from $75k to 60K throughout the process, but now they have added the "as-is" into the mix.  My business partner and I want an out, as the property has some issues, but we like the location and it has two current tenants.  I todl the owner I know there are issues and he doesn't have to fix them, but I want to make sure there aren't any big safety issues.  If there are and it is sold as is, if we back out we lose the earnest money.   There was no talk about this prior to offers which bothers me.   Looking for advice on why the owner now switched this and do you think we should walk if they don't budge on the issue?

Background: Rent is $1000/month total for both the two bedrooms, but we are kicking the upper tenant out.  The neighbors say they have had many issues with them, so we would be down to $500 until the upper is remodeled.  The place needs a new porch (safety issue), furnace, and bathrooms as there is potential black mold.  It is great location and with it fixed up the rents would be $600-650 per month.  The tenant was offered the property at $55000 before it went on the market, but they turned it down.   The owner told them that 55 was fair market value.  

THanks for the help,

Kurt