Sounds like the HOA screwed up big time in managing the problems. How many units are in the building? If you can buy something for $500k under what it sold for, is there another angle at play here? Can someone come in eventually and purchase all the units at a higher price than you pay for it and make some money at it? What is the highest and best use for this property? What is your downside risk?

Looks like this unit is from someone who really don't want it and if you can stomach it through the next few years and fix the problems, you could have a winner on your hands.

I don't know the building or area, but just echoing some of my thoughts.