In your case you would have to be able to say that you had intended to build this house and hold it but there are now substantial mitigating circumstances you can demonstrate for why you are selling it so quickly.In general new construction and fix n flips do not qualify for 1031 treatment.

Link mentioned exterminators, for my lease I always make sure I inform the tenant they are responsible for pest control beyond termite treatment.

I am taking back a second lien on a property undergoing renovation. In a simultaneous transaction, I am entering a security agreement with the owner for a share of any profits from sale and (if applicable) rental, whi...

Or they might just start tearing down houses to avoid vacant houses or eye sores. 

There must be another reason, and it may be the lenders attempts to get around the tax laws.The treatment of the property would not impact the ability, or lack of ability to foreclose in the event of a default.

By assigning the option you can still sell it down the road without having to hold it for a year to get capital gains vs income tax treatment.

Competent financial literacy is sorely lacking with many in the lower and middle classes.  

Get three treatment estimates from reputable companies in the area and include those as well.  

Also can you give me an idea of Lead treatment as well, how is it done? 

Occupant profile: two older ladies on SS, one with mental disability and another with cancer undergoing radiation treatment.