Explain your medical and family situation and ask if they can reconsider the payoff amount or provide any temporary assistance or delay in foreclosure to facilitate the sale.

The two additional units will be detached from the existing structure so there will be no interruptions from that standpoint.I have agreed to a temporary rent reduction at the tenant's request to compensate for the inconvenience and loss of the backyard during construction. 

If your reasoning not to invest out of state is an emotional one then maybe dive a little deeper and figure out if there is a way to over come your discomforts.

That's the beauty of investors, keep emotion out of it.

This miscommunication almost always causes problems and escalating emotions. 

While currently unrented, the duplex may serve as temporary housing for tenants from a nearby commercial property I also own, which requires repairs.

I personally could give a rip about the buyers safety if they dont know any better and get wiped out so what.. but Sellers thats a whole different matter.. a sub 2 gone bad can destroy them financially emotionally physically break up marriages etc etc.

This deal, which combines emotional connection, market opportunity, and long-term financial growth, is a How did you find this deal and how did you negotiate it?

 You may be able to secure higher leverage financing through alternative lenders than a traditional bank (not always the case) and this may help advance your objective of reducing the down payment/cash requirement but that may only be temporary relief as you will likely pay more over the course of the loan because of higher rates and fees.

Most do so believing its only temporary but s*** happens in this business..... timelines get stretched, appraisals come back lower than expected, rates remain high longer than expected etc. etc. and what's intended to be a short term solution often adds quite a bit of strain to the property and your business.