However, I suspect the Sellers CPA will say, assuming option one above is not a viable option, that option two will result in a taxable gain to the extent of the 400,000 not funded and can the gain paid as the payments are received ( remember if seller is self-employed and historically makes estimated tax payments, that they need to include the estimated gain/pro-rata portion of depreciation recapture taxes, in those estimated tax payments  in order to avoid any unnecessary penalties and interest since the tax liability is reasonably able to be determined.  

The county records show that she is still the owner and the tax payer.

Since the taxpayer is the one that benefits of the tax deferral rest with the taxpayer so you would have to take title to the replacement property in the same taxpayer name as the property you sold. 

If I'm mistaken in this it is clear that $900 will not cover the $1350 monthly mortgage+insurance+tax payment.

Each with a minimum of $200 clear cash flow (cash flow per door).Annual cash flow $4,800 Set up your business, Tax payer ID number, checking account, lease contract, set up cash reserve savings acct, prepare personal financial statement, start creditability file, build your team of experts. etc.

The way the law reads, whoever is the tax payer for the old property has to be the tax payer for the new property.  

MY QUESTIONS:1.Finally if you find the delinquent tax payer before the auction, he/ she might be willing to sell you the deed for a very reasonable price but now how do you deal with any Leins  (mortgages,judgements.

Depending on your situation, the SHST (Safe Harbor Small Taxpayer) may come into playhttp://www.nolo.com/legal-encyclopedia/small-taxpa...

Up til now, I have been a "by the numbers" sort of taxpayer, no deductions or fancy paperwork.

I see no reason to pay the $3000 property tax payable now as a interest free loan to the city/county/schools/state since it can wait and there is no tax benefit.