You’ll need to use a broker who can get to the specialty insurance companies.  

You really want to have your contract approved by an attorney even though California doesn't use attorneys for transactions.

I imagine there are more neglected homes like this with some potential in your area.

There are pros and cons to using DPA with your average conv/fha loans ( yes this is how you arrive at 0% down or 100% CLTV or combined loan to value financing).Conv and FHA lend up to 95-97% so that remaining 3-5% down is covered or partly covered by the remaining local DPA programs.

Many buyers/investors are using this strategy to invest in real estate

I use AirDNA as a start point and double check via enemy method. 

We would like to use it as collateral for a loan of about $250k. 

Owned land is being sold at near building cost or a bit above building above cost (this is CA mountain building costs).  

For investment properties sometimes you can do this if there is a history or using Airdna but never for primary residence purchases.

this is exceptionally difficult to do.