That lien must be satisfied before you can transfer ownership in order for you to not be in breech of contract.As Kimberly mentioned, there seems to be some fundamental misunderstanding of the nature of the Lender/Borrower relationship by some. 

@Jay Hinrichs: Did I somehow misunderstand this statement that one of the commentors made?

However I should have been more clear as I think there was a misunderstanding. 

I know for a FACT that a running toilet can run the water bill up, I had a bad misunderstanding with a tenant about that same thing she swear the it couldn't be the toilet but in fact she had an additional 800.00 water bill that she wanted ME to pay. 

Maybe I'm misunderstanding!

I would think I would need to offer 5-6% interest on the money and pay interest as well as principal but may be misunderstanding your point. 

I am not interested in flipping.I am a new investor also as I have 3 rental properties total, so bear with me if I'm misunderstanding some of the acronyms and phrasing.

@Todd - I think the heart of your strategy question is based a slight misunderstanding of the 1031 rules.You must replace the total value of what you sell with the net proceeds from the sale.You can replace debt with debt, or equity.You are taxed on your capital gain in addition to depreciation recapture with no regards to your loan to value at the point of sale.

Perhaps I'm misunderstanding the question.

@Andrew Merritt, it's a common misunderstanding out there.