I kinda agree with @Larry T. there is presently a storefront vacant building right at the corner of where i leave, the store is rented out but the apartment is vacant and it has been like that for at least 2yrs.You also need to be wary of the location, correct me if i am wrong but buildings were there are apartments and stores are technically in D, E locations which could have a lot of issues. this is based on my drive and stay in Rochester NY.Your located in NYC, i think you could take a day or weekend off to come down here and check the neighborhood out.

The house had no foundation issues, it just settled some over the years and these areas showed signs.

Could be DTI issue??

We have a family that is very interested just no offer yet due to bank issues.

Assuming the property does not have major issues such as deferred maintenance or lacks desirability, accepting anything less than 20% down, minimum, is asking for problems.  

The issue is that in those areas there is not many multifamily properties when compared to a larger city like Torrington or Winsted. 

Seemed to me that there may be legal issues with doing this, not to mention it just seems very unethical, and outrageous that someone would be willing to agree to a deal like that anyways on a $20-30k house.Any ideas on that strategy or how that would work?

(Paying it is an entirely other issue.  

There are others who maximize leverage, think that you can easily build a cap-ex fund over time (hint: cap-ex issues aren't linear), and don't insulate themselves.Side note: if the market doesn't go down then those highly leveraged investor with no cash sitting in a "wasted" reserve fund will get a higher ROI based on their capital allocation.  

A tenant could also burn your property down or a host of other issues.