Perhaps a tax lien may get slapped on it and you can pick it up. 

Do a walk through to determine repair costs and use comparables for ARV.Keep in mind that just because the wholesaler is asking for $85,000 doesn't mean you can't offer less. 

Everyone determines their level of acceptable risk and the bidding goes along.

Any advice, experiences, or thoughts would be helpful before we finally pick a location. 

With a basis of $138k and only $1,000 monthly rent, your well below the 1% rule (a basic back-of-the-envelope calculation used by investors to quickly determine a go or no-go decision). 

@Rich Pierro - here is a link to the forms provided by the state of Colorado Real Estate Commission You will pick based on the transaction type.

I’d tell anyone getting an inspection that they’re doing so in order to determine if they want to back out of the contract as I won’t allow it to be used as a tool to get me to lower my price.

Pick 2 or 3 areas that you think you might like to invest and live in, then drive those areas on the weekends and evenings. 

What you need to determine is what is "best for you."

How did you determine which location was the best place and has the biggest ROI for your first investment property?