If you bought a vacant dwelling policy (not builders risk) it was most likely issued on a basic policy which does not cover accidental discharge of plumbing, therefore denied. 

Your large student debt not being dis-chargeable and figured into your debt ratio is a huge factor in getting a loan.Also 150k for multifamily in AZ may or may not be realistic for that market. 2 to 4 units could trade at 30k a door or 150k.

Better asset protection, better discharge-ability, etc. 

It was the start of the real estate bubble and I got lucky.I paid down my student loan as quickly as I could because student loans aren't dischargeable in bankruptcy. 

In most cases, the condos were in some stage of foreclosure by the bank holding the mortgage, then that foreclosure either simply stopped or was discharged.

And if it goes really badly remember that student loans can't even be discharged in bankruptcy.You have a very long time horizon to invest (assuming you are of the normal 'just married' age).

I talk to owners frequently who don't understand that they still own a property (and the accompanying liability) after BK discharge.

Am I correct in assuming that all IRS liens are discharged upon successful completion of the auction?

I suspect that it is possible that you could get caught in a Debt-to-Income problem in the next house or two, so that's why paying down that debt will help you invest more long-term.Plus, you can never get out from under the student loans - it's nearly impossible to discharge them in a bankruptcy.

The heat pump can freeze up, and when it does, you either need to stop using it and use supplemental gas/electric heat, or you can run it in air conditioner mode and use the supplemental heat to raise the discharge air from the furnace to ~70degF until the heat pump thaws.