I know there is the 'due on sale' clause that could be a possible threat here so what is the solution?

In the LA area REOs seem to disappear very quickly, before I have time to visit the property and analyze the opportunity.

“The high-end buyer has disappeared,” said Tim Estin, an Aspen broker whose Estin Report analyzes the Aspen-Snowmass real estate market."

Very dangerous and a threat to both his health and the overall "health" of your property.

You will get sick of constantly cleaning and replacing carpet so that your initial savings will probably disappear.  

The net of this was I ended up offering another $5k to bring me up to $150 "take it or leave it" under the threat of the seller walking, which I highly doubted as they needed all proceeds to close on another property they were under agreement on.Bottom line is $150 was accepted in the 11th hour (pretty close to what time I got a signed extension on the appraisal addendum back as it was expiring the day I made the $150k offer), the downstairs unit is listed and being shown, upstairs is being served notice next week and the property  will be "officially" mine Monday!

Lend less than about $75kSo it's kind of a triple threat (not in a good way), and you may have to figure out some creative financing - maybe the seller would finance with a solid down payment?

The two managing partners left egg on our face when they were placed into direct contact with the Sellers, and just disappeared from all communication when they claimed to want to schedule a walk through. 

i am sure I was due a beat down or at least the threat of one. 

It rains constantly and most areas that are not on a creek or river, still have the threat of that 100 year flood.