Is this a LT residential interest or more like a shared sober house living situation?

It's actually harder if you are currently living in the property, want to cash out, and then have it as a rental as you haven't proven to the bank that the property will cash flow $600 a month on top of the NEW mortgage costs. 1.

(They did multiple inspections, also came for several full afternoons to just poke around the house while we were living there.) 

You live and learn I suppose.

Where I live, we still have a severe shortage of homes--median time on market is still 7 days and it would likely be shorter if not for delayed negations being the norm. 

Was it for a place to live for work before they found a permanent location or was it used for someone wanting to stay in the area as a 2nd home for the winter months?

Unless you want to live in that district, I would avoid any and all purchases in an area like that.

He would need to find a place to live,which would take money off the table for collateral in his next deal.

Foreign citizen currently living in Miami.Any recommendations in general?

That means the government has been borrowing my $600k (instead of $1.2M because I don’t live in California.) interest free for more than 10 years.