My friend is planning to buy a town home in Orange County (Irvine) and wanted my advice on whether it's a good time to buy in that area.

Should I fight the extra charges and try to get $2948 back (original security deposit plus the credit they added on)?

It's probably not worth trying to fight from Texas, but may not hurt to have a lawyer send them a certified letter.  

if it was before and then this hotel built, you should not have any problem opening a hotel, you could easily fight that then. sell it as time shares if that doesn't work, this way the people that will be going there will have year round access to it and will not be short term.

I still fight that rental but a refi and some down payment and the rental is cash flow positive.

It boils down to your legal/contractual rights, and whether you want to stand on them to get this seller -- who is now having second thoughts -- to live up to his agreement.If your attorney believes you have legal grounds for forcing them to move forward with the sale, and if you want are willing to fight to get the property, go for it.

I gotta admit, I kind of fell in love with this ugly house and once it gets an addition to solve some of these problems, I think it could be a real gem that buyers fight over.

Not a battle you should be fighting.

This is for the hardcore veteran that is still willing to fight to make the numbers work.

@James Park if you are right about Johns Creek, Atlanta turning into Irvine, you will have much, much more than $2.5M in real estate in a few years :)