I would start getting an update on the lease.

Due to the minimum hold period (5,7,10 years) for sale residential property likely won't qualify.  

They said they didn't sign with him, but I wonder if they are obligated by him for a time period even though he signed this one contract.  

The 90 day termination period in bold is what is concerning.

Account Closed - If you DONT have VA disability you should apply for it.  10% or more waives your VA funding fee forever and makes the VA loan the best, period.  

Income of Recently Discharged Veterans (continued) (2) Voluntary Separation Incentive (VSI) Annual payments Taxable in the year received Include in effective income Calculated by multiplying the veteran’s years of service times two Requires a minimum of 6 years service (equates to a minimum of 12 years annual payments) If the veteran receives both VSI and VA disability compensation payments, the VSI is reduced by the amount of disability compensation.However, if the disability compensation is related to an earlier period of service and the VSI a later period of service, the VSI is not reduced by the amount of disability compensation.

The property has been unused for 2 years, still has furniture and will require some updating/cosmetic work to be rent ready but it seems like a great option to avoid the lender process on my side. 

If not, it might be worth working through your realtor to have the current landlord update the lease to make these changes (he can give the renter a free month to sweeten the deal if needed). 

Auctions do not have a due diligence period.

Most recent comp shows a house with 700 sqf less than our house, one less bath, and 1 less bedroom,but is fully updated under contract for 300k.