So now they start doing things to scratch that itch, and it starts unraveling the "perfect" Sub2 deal. 

In a rapidly-rising interest rate environment (such as we've recently experienced) that tradeoff may or may not pay off.Unfortunately, in CRE finance there is no perfect financing vehicle and you can't eliminate risk--you must choose which risk you want.

Some properties are about 5/10 min walk to Reed so this would be perfect.

MidSouth HomeBuyers specializes in rehabs and a vertically integrated model in Memphis and Little Rock.

Yes, that makes perfect sense, especially in such a large transaction to find the replacement property.

If you wait for the perfect deal it will never come. 

The paint is never going to be perfect and its far easier to pick up on imperfections in a vacant house.

If so, you are perfect for finding a fixer and going that route.

I want to make the best decision while honoring my agreements and maintaining professional integrity in this deal.

That is exactly what traction helps you do that @Chris Seveney pointed out.It doesn't have to be perfect, but just getting something down on paper will be a huge help - at least, that's what I found when I started our Chicago general contracting business.