. - people who can’t or won’t pay taxes often have other financial issues that result in judgements against the property.

If I subtract the judgement amount from the assessed value I might have something resembling an equity estimate for each property.

No judgement here, I know lot's of successful and lucky investors who are not risk adverse.

They could have paid $5mil for the note and they may be willing to sell for $1mil if there are liens, judgements, taxes, etc on the property that total several mil.

What’s not okay is prior evictions, judgements or bankruptcy (recently).

There may be liens or judgements against the property that will take time and money to get cleared up.Pros:Less competition than on listed properties and potentially more profit.Bottom line, I wouldn't recommend it for a beginner. 

What will be tax consequences for borrower of rental house giving property back to lender through deed in lieu with following situation.(1) Lender issue 1099C , No deficiency judgement.(2) Lender don't issue 1099C , No deficiency judgement.

If you have written your lease correctly then all your attorneys fees can legally be deducted from his deposit or you will get a court judgement that includes the rent plus attorneys fees.

There is a certain amount of judgement on the difference between damage and normal wear and tear. 

Regarding damages, if you were able to get some sort of financial judgement, the chances of collecting on it would be close to zero.