You haven't described the location or the condition of the home at any point during those last 10 years, so I'm left to speculate, but it is very possible that the sale for 69k could have been a very motivated seller.

Then out of nowhere TWO MONTHS LATER they show up on Jan 2nd from their lawyer stating that "my client is ready to close by Jan 5th for a credit of $20,000 and my client believes the contract is still open and valid and my client has reinspected the property and is satisfied with the condition." 

Generally comps are not exact as this is single family homes so condition or layout or something is different and AC is just one of those differences. 

City road ends at park entrance.Considering the land price, infrastructure setup cost each lot cost was coming around $7300 which was very attractive even though most of the houses on them were old and needed good repairs.All other lots except the 59 were in considerable good condition and our due diligence showed that whole park value is going down due to these 59 lots mismanagement for 40 years.As per owner rent collections were around $7200 per month and most of the tenants were very long term (average rent $400 per home) which he receives in cash so bank rolls available to validate.As per our estimate, each house needed 7k to 8k repair to make it livable.Negatives:These homes/lots were owned by same owner for 40 years and he neglected everything which includes tenant quality, infrastructure (such as overgrown trees, bad homes still in the park which should have been removed years back, 3ft- 4ft potholes on the road since its privately owned).Most of the tenants were convicted or had some big felony, these houses were famous for drugs cartels in whole city.After buying we realized things were way worse than what we assumed in due diligence:People staying there actually were involved in gang wars, prostitution, drugs etc.

That doesn't make sense to me.You will need to adjust for condition. 

Any turnkey investor should ask very probing questions of the turnkey provider regarding the condition of all mechanicals, roof and windows prior to entering into a deal.

To your point, in nicer areas buyers usually remodel regardless of inside condition.

Replacing whatever is in the worst condition is likely to give you the most bang for your buck.

"my offer of 100k is in line with the market and the conditions of the property, it needs xyz repairs" etc

People will move there and stay there until their kids graduate.Every market has crime-tracking devices.