Personally, I would like to legally avoid as much tax as possible.

In my opinion, she has not legally surrendered her possession of the rental unit if she has not returned the keys. 

These claims are designed to build authority and get you to listen to them, instead of thinking critically.

While wholesaling itself is a completely legal and valid practice, when you start getting creative, you can easily start making some moves that can land you in hot water (if you get caught). 

I would go line by line through each property to make sure they made the adjustments property (like condition, the garage you mentioned, etc).It's my understanding that the appraisers can only count legal sq footage, bedrooms, baths, etc.

The Builders Risk policy was designed for new home construction to address the property coverage as a house is being constructed. 

Since it’s often a “he said she said” situation, just like in your case, they don’t make the legal decision of who’s right, and they don’t want the liability.

There are plenty of creative ways to fund a deal - many are legal and totally fine, but as a realtor you need to be kind of careful about how you get creative. 

Can they, legally?

I was first introduced to real estate at about 7 or 8 years old mid 60s  when my dad worked for a land sales company that was selling lots out by Loch Lomond reservoir and the office was at the Trout Farm inn  :)  those are probably still legal lots of record but probably not buildable . you could sell those back in those days.. but the redwood trees on them are probably more valuable than the lots.