I also, of course, agree with your sentiment on the tenant quality issue for C/D neighborhood classes.  

Focus on the right asset – multifamily real estate is popular during times of uncertainty because people have a preference for renting during these times and because it is valued intrinsically it is less prone to large swings in sentiment which can impact the value of single family homes.2.

I agree with the sentiment above about hiring a consultant to assist for your project type.

With the little information posted here, I’d echo the sentiment of others in that the highest and best use sounds like it is an industrial facility. 

CA is my home and I don't want to leave but I can't be sentimental about this. 

@Dylan Thomas Agree with the sentiment already expressed, you were the emotional one in the situation and it cost you a potentially good deal.  

Normally I'd just tell my dad and aunts (the heirs) to just let the bank take it back, but the property is oceanfront, has some sentimental value, and would actually cashflow well as a vacation rental (assuming I could actually purchase it at $475k). 

I share the same sentiment its not neighborly, but no laws are being broken, take the 400 and put toward the fence, make it strong make it nice and hopefully this neighbor will come around in the future.

Despite @Caleb Heimsoth's sentiments of "It doesn’t sound like you’re in a position to buy something Like this" it can be done. 

At the end of the day, people can hold really high sentimental values to certain things in the house, so tread lightly.