Two Family Under Contract Issues

I am in the process of buying a two family house in Long Island NY. The seller is actually a wholesaler and this is the first time I have ever purchased from a wholesaler. The contract is not assignable which means the seller has to take title before he could sell it to me. Most likely it will be a back to back closing. The seller told me he set it up that way because he has never dealt with me before and therefore wanted me to sign a standard real estate contract. I'm assuming there are reasons for structuring it like this that benefit the seller?

Before signing contracts, I did my due diligence and could not find any documents stating that it is actually a legal two family. Usually the building department would have a certificate of occupancy on file but did not have anything for this house. One variable that I should mention is that this house was built before the building department started keeping records. Up until a few years ago, the building department would issue a deed in lieu in of in order to allow people to buy and sell these older properties. Since then, they have changed the rules and sellers and or buyers have to take out permits in order to get an actual C/O for the house. 

When I went in to sign contracts, I made sure my attorney added language in regards to my purchase being contigent upon the seller proving with documentation that the house is actually a legal two family. Low and behold the seller had to hire an expeditor and apply for two family status. My attorney told me this can take months to accomplish but that there is a pretty good chance that they would get the C/O. 

About four months into the contract, I was notified that the building department gave the seller approval for the house to be used as a two family but with a handful of conditions that had to be met. The approval was based on the fact that as far back as the building dept. could see, the house was being used as a non conforming two family. It's what they would call grandfathered in as a two family.

Two of the conditions were to remove two half baths, one in each apartment. I'm not exactly sure why they couldn't legalize them but I do know one of them was in the basement and the other was a small pantry closet turned into a half bath. When I found out about that, I asked the seller if he would put them back after getting the final approval and C/O. Obviously removing two half baths is going to reduce the value of the house as well as the rentals. He replied that the baths were illegal and since I wanted the house to be a legal two, he had to remove them to conform. I have only been in the house once and have not been back since the baths were removed. My attorney and I have discussed asking for a $5,000 credit but he hasn't called the sellers attorney yet to let him know.

I am getting the house for below market value and there are not many two family homes in this area. I'm not really sure how I should proceed because I don't want to lose the house. Now that it's going to be legal, the seller can easily sell it to someone else and probably get more money than what I am willing to pay. 

I would appreciate any advice and or feedback relevant for this type of situation.

Thanks,

Eric