My new offer would take some hide off these egos.   

Assuming all conditions were waved at sale he has no grounds unless you knowingly hide the plumbing issues.Let your lawyer handle it.

Everything looks good financially, however I've not sure what I should look for or how to protect myself from, any possible outstanding taxes or other liabilities that might be hiding out there on the subject acquisition LLC.

If the seller lies about paying the fines, what else are they hiding?

Make sure they aren’t hiding other issues (felony, eviction, etc)

It can be done I have done it.I have also done a ton of pre foreclosures day before it went to sale recording my deed myself the day before.. and sending a courier with certified funds to the trustee by 5pm the day before ..

@Ron S. even though CA law says 5 days and full payment needs to be made this can be waved by the bank.. they are not obligated to though as you so correctly point out.basically you need to do these deals outside of escrow you need to know how to do your own quick search and take the title risk.. then you get the seller to sign a grant deed over to you and you go record it.. then you get your funds wired or cashier check couriered to the trustee.that's how we did it.. not enough time to use title company.. that's why its so profitable if done right 98% of your competition simply can't do this  either lack of knowledge or lack of funds or both..

They must be hiding something that will eventually come out to light.

I've seen pictures that managed to hide that a house had no roof.

You need to find the honest (one that doesn't hide their intentions from the seller) wholesaler, who actually has solid deals and then become one of his go to buyers.Just always run your own numbers.