In my last sentence I said the following:"Curious how some of you would structure this deal or what would make sense to offer." 

Hi Duncan, Yes you can negotiate during the due diligence stage and you can try to negotiate at any point in the sale process until close.If you end up not being able to move forward during your due diligence, your earnest money deposit should actually be fully refunded to you, provided you put in the contract that your offer is contingent on your ability to do your due diligence.There were several deals I worked on where additional repairs were found during our due diligence that necessitated negotiation.What we did was thoroughly explain to the seller the impact of the additional expense and then offer them the options of moving forward at a lower purchase price, or working out terms at the same price (owner financing/sub2/something else), or cancelling the agreement.Usually, the seller would choose to move forward at a lower purchase price but we definitely had parties choose to cancel or finance too.If they chose to move forward at a lower purchase price, we'd write up a simple 1-sentence addendum to the original contract stating the new purchase price and have both parties sign.You may want to include a deadline in writing of when the seller must respond by before you move forward with cancellation so you don't lose your EMD.

These notices usually include a sentence letting the tenant know that if they don't vacate by the date listed, legal action will be taken.

@Amanda Schneider based on the last sentence of the paragraph from your contract I would say they have full right to cancel contract.

There was a prior post on BP that referred to a litigation case involving a Trust company where the end result was the sentencing of two individuals with fraud, and millions of dollars of SDIRA dollars lost. 

These two sentences are at odds.

I was a bit confused by your second sentence. 

That question is relative, and can't be quantified in a sentence.

It later talks about if an owner has more than 3 rentals, they can only sell to owner occupied buyers unless they own 3 or less rentals.the first sentence where it says “the maximum number of tenant properties allowed at any one time will be limited to 3”.

Your last sentence said it all.