If you allow this to continue, they will only get worse over time, and your losses will increase.I suggest you hire an attorney.

If we price the home based on what they thought they could get for it, it will sit for weeks/months.

Strong agreements that protect your position in the deal, and recording a Memorandum of Option with the county will go a long way to protecting your interest. 

There's an opportunity for an ADU in the backyard, but I will buy another rental property before adding the ADU.

There is also potential for an ADU in the large backyard, but I will buy another rental property before moving forward with an ADU plan.

Just a heads up this will not be tax free, it will be a pro-rated exclusion.

The big unknown is how deep the electrical and plumbing work will go.Also, with the attached 1/1 unit, I’m debating whether this could work as a long-term hold instead of a straight flip.

That will be tough to use your HELOCs together to get another loan because of your collective DTI so it will depend on that.

Find a good real estate agent that is also an investor specialist and they can help you navigate what will get you your best ROI for your situation.  

Thank you Preston I will check it out.