I don't think this is very ethical as you technically don't have the cash. 

We had 2 escalation offers on our most recent sale and it definitely helped the “winner” and our broker was very ethical about it - I don’t think a buyer who offers an escalation would honor it without seeing another offer in writing.

I did a quick research and it seems many people are doing it and there isn't anything wrong ethically or legally, so is there something wrong in subletting for profits that I'm missing?

Weither or not this is ethical is a different topic but it happens and I feel like that's highly beneficial for the buyer.Am I missing something?

What is my legal/ethical obligation to first people that signed lease but no deposit yet. 

By God's grace, last month, Doctor #14 figured out what was wrong, and I am now on a treatment plan.

Flips are taxes are ordinary income in the same year, but rental is not taxed because you are not selling rental each year for profit. and eventually, when you sell, it will have capital gain treatment.

Our agent said treatment took place earlier this week and repairs are being completed too.

@Nancy Pults,It is against our code of ethics to lie about there being other offers if there is not.

But it's an ethical thing.