What are our options if we decide to walk away since the seller has a breached in contract?

You need to see a Real Estate Attorney immediately.   If you walk away from this transaction, you could be held liable for damages to the buyer.   This is not a simple matter and you should be concerned about your potential liability as well as your claims.

You need an attorney to review all of the documents in this transaction before you make any mistakes that could be very costly.

If getting the renters out before the closing was a term of the contract, then the seller is in breach and you should be able to walk away from the deal as well as recover (by lawsuit, if necessary) your costs. If however getting the renters out is not actually a term or clause of the contract of sale, then seller has not breached--even if they made verbal representations that they would get rid of the renters, if that's not in the contract of sale, that contract still stands.

This is a situation where you should consult with a local RE attorney for a definitive answer, even if it costs you something for the consultation--the stakes are very high in home-purchase cases like this.