However, the would-be seller still hasn’t taken any steps, meanwhile the tax delinquencies are accruing, and the property will officially come under “power of sale” status in a few months from now.

The scenario is that the interest was accrued in prior years, therefore not deducted, but was paid upon the sale of the property.

@Oscar GuzmanOut of curiosity, if you aren't living there how is it a "househack?"

We accrued plenty of interest and points we owed our private lender and we had to take out a 15k high-interest credit card to pay for the materials when our money ran out. 

I have one single-family rental in Washington state that I plan on keeping for a while and accruing equity.

The house belongs to the property owner until the hammer falls.Given your time frame, speed is needed.The amount owed, plus fees accrued MUST successfully be paid off BEFORE the auction hammer falls.Much success !!

I feel that investors are developing a lot of false confidence that has accrued over the past 15 years.2) You are thinning out cash flows. 

Out of curiosity, besides the savings, how do you plan to fund your future mortgage?

For example, in NJ if I don't handle a tenant's security deposit correctly the tenant can demand a 7% per year interest from me even when a landlord-tenant account only accrues interest at 0.15% and I have to give the interest to the tenant on the anniversary of the lease or by January 31 every year.  

Allow myself time to accrue more equity in my property and let the market appreciation do its thing.