I think it is the psychological effect of the move.

I've been a part of some of these deal and the psychology of everyone involved is fascinating. 

It’s just math, but the challenge is more in the landlords psychology!

@Bosko Mijatovic All I can say is there is something that happens psychologically with people when it comes to payment for service.

I use the site Psychology Today as my referring source.

Doing it this way may not be monetarily the best way to do it but it works better because you get a psychological reward of paying something off and it will then give you motivation to pay off the next. 

And that value is two-fold: firstly, you get the value of newly upgraded property (and you don't close until the rehab is done, so that vacancy time isn't on you), purchased at market price, that (if you finance) your tenants will pay 75-80% of over time; secondly, you get the psychological value of knowing that someone else has skin in the game, someone who absolutely knows what they are doing and has efficient systems in place to ensure you do as little work as possible while still collecting monthly income.

The problem I have is understanding the psychology of the seller (in pretax sale foreclosure )....

A Ummm, no there's a lot of risk with body fluids of a person who decided for whatever reason (psychological, medical or viral) that their life was going to get worse.

But it is usually more of a psychological hurdle than anything.