It could still be a good rental with a less extensive rehab, but we are looking to remodel/resell.

Acquire, rehab, resell, relax ... repeat.BTW: congrats on understanding yourself. 

I suppose the basic options are as follows....and would appreciate any other feedback.Option 1 - I simply take the property as-is (as yet I do not know if the lender will agree to this condition....but, even if the lender didn't care, this condition concerns me for when I resell it if I do nothing AND if I try to fix it, there will be a cost for me to try AND - as mentioned above by Dave, I know in other cases if the encroachment is old enough, you can actually loose the encroached-upon land [there is case law in Florida on this - I think I saw 7 years as a timeframe beyond which you could loose rights to the land])Option 2 - I walk from the deal (don't want to do this....but I'm having trouble gaging how significant a blemish this is)Option 3 - I extend the closing until the seller fixes it (unlikely that seller would agree...I probably wouldn't if I was the seller)Option 4 - The seller agrees to fix it after closing and escrows money to guarantee he follows thoughOption 5 - The seller and I agree on a monetary amount and close. 

If you're reselling in an entry level area and all the recent comparable sales are all in average condition and are selling quickly, you may not get the return you're looking for by going all out.

Does the situation ever happen that buyers at the auction might be willing to resell the properties in their current state?

If you close on the properties, you can resell them.

Do you actually have to have your own total funds to purchase it out right and then resell it?  

I figure worse case scenario if I can't resell my first investment property or rent it out I can move into it as a last resort!  

I don't know if you're trying to rent or resell but a new roof will only help complete either strategy.

Options: 1) Resell the SFR as is - maybe make a few thousand, break even,  or lose a little2) Fix the subfloor and prep the bathroom and kitchen to be finished for about 2500 and sell it to someone else to finish the kitchen and bathroom to their specs.