If it's dead or alive and it hits someone else, my liability covers the issue.

In the process of buying an REO 4 plex. Owner is still in one of the units. My conventional loan cannot fund because the owner (holdover tenant now) or foreclosing bank will not cooperate in getting a wall heater inst...

Consider seller financing some or all of the assignment fee.

So you will get paid every time we close a deal together if the seller's commission is inadequate. 

Aside from cashing out a portion or all of that account and taking the tax hit, does anyone have any strategic/alternative suggestions?

As far as paying the 3.5% out of pocket, there was a grant to cover some or all of this (not sure if it's still available).

I'm in San Diego also it's a little tougher market over here since prices have sky rocketed and the banks require a large down payment unless you're doing FHA or all cash of course.

If you inherited it free and clear, doing a cash out refinance should give you the liquidity to do much or all of the work.

@Annette Hibbler is this just Detroit or all of Wayne county?

:D  Sometimes I have more success with going to Google and doing searches like "rehab budget site:biggerpockets.com"; Google has indexed most of the posts here, and searches like that use Google's keyword handling - you can search for exact phrases using quotes, avoid "or" searches, etc.I think the "advanced" search here on BP gives you more options - you can search a particular forum, or all posts from a particular author, or posts before or after a certain date, etc.