Take the hit on my third property by selling it and using the proceeds to buy more properties in Texas. 

New Texas Excess Proceeds law introduced - What is your take on this ?

Since the court date was in two weeks I was planning on putting in the contract that the price was "contingent" on what the outcome of the suit will be.

The conventional lender does care that some or all of the source of the initial funds were a HELOC, and in my experience they will require that the cash proceeds from their loan first go to pay off the amount borrowed on the HELOC to fund the initial purchase.  

You can figure out their rental history from public records using beenverified.com and/or your local court websites.I usually just do the latter; If they don't have any rental judgments or a criminal record then that is usually a good sign and if they do then you might want to think twice.

In Alabama, individuals can represent themselves in court. 

In effect, just because you pay them on a 1099 / independent contractor basis, doesn't mean that the courts or WC commission will agree.

Since you're unsure how to proceed, you might want to consider partnering with another investor so you can monetize the deal before another investor does so. 

These fees should be paid out of proceeds at settlement.

This clause says that if a court finds any clause in his contract to be deemed illegal or unenforceable then he rest of the lease remains legal as enforceable.