Because of its location, I cannot have two proper units, but can have a main unit and an ADU or rent as one house (although I’m hoping the new development will bring a change to my zoning code)  The basement has 8ft ceilings and is completely finished but I’m thinking of digging down behind the rear wall to add a full bedroom and reconfiguring the floor plan to accommodate another room, kitchen, and door to walkout (2 bed/1bath unit).  

We have seen this strategy work well for many clients as long as proper due diligence is performed and the PT rules are understood and followed. 

In the end, you are going to need a little more insight than you’ll gain from this forum to know for sure that they are doing everything properly.

This, right here, is why I got out of Pittsburgh proper.

Hire an attorney to do it properly before you lose everything to bad wording in the contract that you got for free online.

Give proper notice and proceed.

2) If the answer to 1) is Yes, can you advice the seller what's the proper way to do this - contact the agent first to let her know he wants to sell the house himself and wants to be out?

If the infrastructive isn't properly maintained, one major repair could easily eat the small cash flow that may exist. 

Most people like to enjoy some sort of holiday meal and/or HAVE TO buy food and this would pair well with the timeframe you're wanting to give something back. 

I agree with Matthew - real lenders should have a company driven email or at least the proper signature with the company logo and license number.