This particular tract of land is a fairly rectangular 7 acres (400'x700', more than needed) and is owned by someone who stopped using it prob 10 years ago.

I'm looking for suggestions on how I might fairly structure a deal and still keep the current mortgage I have, at 3%.

If location isn't a big factor (does not seem to be based on original post) I would highly recommend looking into building a barndonium or shouse in an an area where you can get a tract of land fairly inexpensive and has little zoning regs and requirements.

Fair enough.

Asking for a prequalification letter from them seems like an easy and fair exchange.

Yes, to be fair, if it's a straight-forward all-cash purchase, then the due-diligence likely could be done in 60 days or so. 

To be fair, some of those issues may not be covered such as contractor's cheating you and I have never seen a pipe burst cause a total loss.

How do you fair late in the year rehabbing/ flipping houses?

However, I want to ensure I'm properly structuring deals, receiving legal and fair compensation. 

Given your tax situation, I think a fair price you could expect to pay is between $500 - $1,000.