If you close in 45 days with a normal owner-occupied loans, you should be able to make competitive bids. 

Let him go month to month, you can do the normal rent increase. 

Is it a normal practice?

Has it become normal in this market for the buyer to pay the difference in the appraisal and the offer(3k-10k) in which in some cases basically pays the sellers closing cost?

They normally require 20% down Payment.

Is this a normal amount below asking for a duplex in this area or can you get a larger discount?

If you have no recourse, it would be better to sell than to let this HOA interfere with your business forever.These growing HOA abuses are an illustration of how little help normal people get from state and local governments.

I would assume supply/demand would keep prices normal and killer deals scarce.

So maybe there is no 'bad' direction for you to go but I would encourage you to keep working especially if you like your normal job.  

Normal business expenses get deducted from your taxable income which lowers your tax liability because you incurred that expense for your business.