In a worst case scenario your family comes first, and having your home free and clear will maximize your family's safety.As far as using someone else's money goes, the bank's money would be a good candidate for that risky position.

Run the numbers at the worst point in the cycle for the worst duration in the market you are looking at while paying attention to the reality of the future (i.e. if the local market is heavily dependent on lead mining and lead mining just became illegal, probably not a good risk, everything being equal).

Same story in Indian Village Burns /Fischer streets share alley with some of Detroit's best houses on one side and some of the worst on the other.

After giving it some serious thought, it does seem pretty dishonest to mislead the seller into believing YOU are going to close on the property and then worst case scenario ending up voiding it all together through a "weasel clause" and wasting everyones time.

Anyways the catch...well I walk in head to the back of the house and man it is the worst slop I have ever witnessed.

The worst they can do is say no.

You can find them in Dayton, Ohio market, but as @Jay Hinrichs  states, lock your doors. 30K in Dayton will avoid the worst of the warzones.

What is the penalty and worst case scenario? 

Consistent income is important, but you always need the working capital to keep you going in a worst case scenario.  

I would suggest reducing the asking price.You can also rent it out and take it off the market, and try to sell again later, but I view treat as the worst-case exit strategy.