The question I'll be trying to answer tomorrow is this -- if my purchase price at auction is higher than what the lender and IRS are cumulatively owed, does the additional money above making the lender whole go towards satisfying the IRS lien -- thus putting out that red flag fire either way?  

You’ve pretty much waived a big red flag saying I’m going to renogotiate or bail.

if you search there's a few threads regarding the Redding fire.  

To me, that would be a red flag of someone who is willing to stiff either side if it doesn't work out. 

I like Phoenix, Vegas, and San Diego because of the proximity but am reluctant about the timing because those markets are red hot right now.

If nothing else, it would show the tenant you are taking their concerns seriously.I would also do a search on the property history;   it's very possible the tenants did this as well, and uncovered something disturbing about the house that is the root of this.  

There were no big red flags in the owner statements that I was getting.

Surely this has enough red flags to warrant rejection

I also say you need to look at the reports you have that will tell you if each individual property is in the black and which ones are in the red. 

Host flip or flop on HGTV is a red flag- Are they really teaching you how to act in a reality show or teach you about whole sell?