Best option: make the purchase contingent on the Seller presenting it to you vacant.

Discovered new, open violation during escrow; seller's defaulted holdover Commercial Tenant lives nextdoorWhile in escrow with contingency to deliver premises Vacant, seller of commercial building disclosed that tenant is in holdover and in default on a month to month lease expired years ago, with hundreds of thousands in back rent unpaid.With just 4 days to closing, an open code violation has attached to commercial building regarding the tenant's business activities (vehicle rentals) encroaching on the public dead-end street between the commercial property and their nextdoor home which they are also operating their business out.After closing, how can the seller ensure the new violation (that wasn't there til after going to contract/escrow) is addressed, and that relatedly, its default/holdover commercial tenant has actually moved out? 

My offer is contingent upon full pro inspection.My Initial Offer: Purchase: $375,000 Down payment: $20,000 Interest Rate: 3% Amortization period: 30yrs; Balloon in 10yrs 6 month moratorium on 1st payment (to give me time to vacate and upgrade at least 1 unit)Sellers Counter Offer: Purchase: $395,000.0: Down payment: $60,000.00Interest Rate: 6% aprSeller to carry the balance of $335,000.00 amortized over 30 yrs.Balloon of full balance in 3 years option to extend 1 yr if needed.Monthly payment: $1675.00 interest onlyNo repairs.First payment due 45 days after the close of escrow.I am not working directly with the owner.

Some investors make cash offers with quick closes, some offer above the asking price, and some don't put in any contingencies. 

It's a seller's agent doing their job, which is to get the best possible deal for their property, whether that's price, terms, contingencies, financing, time to closing or something else.Both a seller's agent and buyer's agent are fiduciaries to their client in the same way their attorney is.I know it stinks from the buyer's perspective, but that's the nature of the real estate market.BTW - you mentioned that the seller sat on the offer for "several days". 

Discuss all the terms; due diligence, price, closing, earnest money, financing, contingencies, etc.

., they are not refundable and the purchase is not "contingent" upon a variety of other events, such as inspections, financing, etc.  

And if so, are you able to put a contingency in the Purchase and Sale Agreement stating that you’re able to back out of the deal based upon the amount of rehab work that needs to be done on the property?

With the market being so hot we waived the home inspection as a contingency.

Lastly, have you ever seen an offer contingency that a C.O. must be issued without making major modifications to property, or is this unworkable since the property must actually change hands before C.O. is issued?