Negotiation: Code-violating seller won't remove tenants

[Bradley A.]

Hi all,

Working on a deal and need advice. 1st offer in.

Property listed at $665K, offered $500K cash with the contingency that tenants must be removed by closing. Tenants are on month-to-month leases and in our area, you need to legally give 60 days notice. Seller has turned a legal 2-unit coach house into 5 highly illegal units - total squalor with many code violations.

Seller has lied multiple times on the listing and in talking to us, and they are essentially housing people in filth. Not a highly ethical individual.

The property has two buildings - a legal 3-flat and a legal 2-unit coach house. Both need total gut rehabs to the studs - crumbling plaster, rusted out plumbing, broken joists, old roof, outdated electric, ready to fail HVAC. Really desirable, high-rent neighborhood, however.

Seller countered with $660K and no willingness to remove tenants prior to closing. They'd like to close in under a month. We're not willing to do any deal with tenants remaining at the time of closing.

Advice on countering? We're willing to go up some in price, but not at all on tenant issue.

Are we correct in assuming this seller almost certainly needs to find a cash buyer? What legitimate commercial lender will touch a property with the above tenant & structural issues?