Additionally, you have to consider the additional people will further add to and naturally accelerate the "wear and tear" of everything from carpet, to fixtures, doors, etc.  

The asking price was $599K for pretty much a tear down.

I am interested in tearing it down to build and sell.

Due to the fact that 3 people died and the continual perception it will give future tenants, you might want to tear it down and rebuild new. 

Had to get a Deed in Lieu of Foreclosure signed and notarized by the occupant so they wouldn't tear up the property before listing.

Are any of the items wear and tear? 

And I personally went through the person in LA in tears... as they were just stuck..

Make it more open (tear down a few walls), new kitchen, add at least a half bath, make other one new.  

Sounds like just the sort of property that 203k was created for.Kitchen #5: Tear the appliances out, keep the guts/plumbing/etc in place, sheetrock over it so no one can see it, finish the renovation project as a lawful permitted 4 unit.

I feel it has been an additional income stream...I can tear out and replace carpet and pad for about 1.50 a foot..