I am planning to just have a very basic plan just incase we got hit by a bus...And a big fat bank account will help with your confidence.

I want to put only $10 down so as to bind the contract but I don't know where to put it.  

When I questioned this I was told that they didn't do contracts and that was their binding agreement to do the job. 

The auction was non binding and the sellers did not accept.  

I'm thinking I can later cash-out refinance into a loan (possibly a VA loan) to finance another deal and wrap the new mortgage so as to keep the installment payments in place and avoid hitting my retiring family member with a big fat tax bill. 

If it was ripped like the one in the pic, no wonder why it didn't taste tender enough - too much muscle and not enough fat. 

If you can't find that restriction, then go back to the HOA and ask them to show you where it is written that is legally binding preventing a company from taking possession of the property.

Does the owner know you are walking away with 40,000 but is okay with it because he is in a bind?

You can put contingencies in to cover yourself, but you're playing with the seller's emotions by presenting offers that you may have to back out of.Even without an EMD, there's a decent chance that if a seller signs your offer (the act of acceptance), you could have a binding contract. 

I love the story about plumbing, it's a common issue, but, what I have embedded in my contract is, if we show up, and the materials are not ready, it is a legal and binding change order to pay the whole day for all the crew (a separate clause is also there for how much per hour rate it will be in case of COs).