This experience taught me to trust my instincts more and never skip due diligence, even in areas I am less familiar with like basements and water intrusion.Any advice on how I should proceed would be greatly appreciated.

Readers should seek professional advice.

It sounds like we didn't do a good job of setting expectations with you on the front end.

You might consider: Consulting a Real Estate Attorney – Your emails may possibly prove misrepresentation.Requesting Public Records – A FOIA request might reveal why the city denied you but later approved the duplex.Escalating to City Officials – Bringing this to local officials could expose inconsistencies.Exploring Tax Write-Offs – A CPA might help offset your financial loss, if it is possible.I’d definitely seek legal advice.

Sounds like you are in a pretty strong financial position.

A common bit of advice seen on this site is, "Don't spend $20K on a mentoring program when you could spend that money on your first deal and you'll learn much more."

Working in a busy property management company, I'm often asked for advice on camera and alarm systems, and in rougher neighborhoods sometimes it can be a toss-up on whether to keep a property boarded-up between showings. 

Readers should seek professional advice.

You got some solid advice above check with your lender and get in contact with an attorney like @Bob Floss II who can help setup the OA.Assuming there is no pushback from your lender, you should be able to do a quit claim deed to retitle. 

I like Warren Buffet's advice to make sure you understand the investment completely before investing.