How much do you usually see properties going up in appraisal value on average?  

I believe Erie distributes their products thru independent agents so go back to your current agent and ask them to review your policy and shop. 

I realize this contradicts the above, just stating options.The average sale price of duplexes in Cambridge in the last 6 months is 1.4MM, so there should be plenty  of bidders at the auction.  

It seems like he wants conventional terms but a portfolio product.

As a buyer it wouldn't spook me at all if someone told me ahead of time about the situation, but I can't speak for the average buyer because I know how renos work and they probably don't.

My averaging closing cost has been $20K. 

Then start researching construction loan products in your state incl. fixed rate one-step because interest rates are rising, and find one that let's you borrow WITHOUT the land. 

You are free to purchase the product they offer, or you can not purchase it and buy a product from another vendor.

I've tried searching for such a product with no luck.

The Comp Sale method and REI in general have enough variables in them already for the average investor; adding in the wrinkle of buying above market value is not something I'd do in general.