Advice needed on a multi family deal

Hi all, I'm a commercial and residential realtor. I have a 5 unit Multi family pocket listing however the sellers did not disclose to me that one of their tenants is a registered sex offender until we were about to sign contracts with a buyer (also a client of mine)

When this was disclosed to the buyer (a newish investor), the buyer backed out of the deal. I suppose my question is does anyone have experience with this kind of situation? Would this always be a brickwall for most investors out there or would it depends on the terms of the deal ect. 

I was just interested to get different investors takes on this kind of situation and whether this would always be a run for the hills type of thing or if it wouldn't faze a seasoned investor?