You might be able to review some of the fees charged by your broker and lender to see about a reduction.

The tenant might keep the run down space as a bargaining chip for the landlord to do major TI upon the option or a rent rate reduction.

When buying at a foreclosure auction, I have several risks and most of them are controllable. I can figure out the ARV with some degree of accuracy, I can check for title, senior liens, etc.

The big worry for me is ...

Because of my homework I know that they wont close at the end of the month because if they want to apply for violation fees reduction, the Board meets only once a month, and they missed the deadline.

The good news is that I am still in my due diligence period so my first step is to negotiate a drastic reduction in price. 

If I use interest to make up in the long run for home price reduction, I'd be offering something like 4.5 - 5 %  -- Is this too high for investors? 

A 1% rise in interest rates is essentially a 10% reduction in purchasing power by the future homeowner.

Would you agree with market rent reduction for a tenant who is behind on current rent?

You list it and it gets no traffic so you are begging for a price reduction.

Start a sensible weight-reduction plan...today.