If you haven’t had the conversation with your relative about getting those “unofficial” tenants out, I believe you should do that soon and present your plan how it will be beneficial for both of you and you can begin the process of getting new tenants in. 

I presently have a few multifamily properties in Philly.

I live in the south, so between high moisture/humidity and weather, moisture is present.  

We are looking for a duplexes or single family (most multi-family are over our present budget).  

Both during bull markets like 2014-2020 and during busts like 2009-2012 and 2022-present.

If there is mold present you must go to the sticks and bleach it out.

Does the landlord have to be present in court to testify?

Quote from @Jay Hinrichs: But like I said its only a handful of folks I would trust to be my clients for this type of activity far more risky than vanilla lending.Why do you believe the risks are higher in the scenario I outlined where clear title is guaranteed at closing but not weeks in advance to present to an underwriter? 

The local agent that was present at the beginning of the project had gone completely silent.

However, If you are advising others of this equity drop, maybe you should present your case or evidence as to where your theory comes from.