I've been contacting my PM repeatedly and sending prospective tenants their way - but their excuse is the applicants aren't qualifying.  

The problem I have seen across the board is that most agents simply don't understand the principles of investing, what investors are looking for or how to walk a property and adequately estimate repair costs.Unfortunately, most of these skills are only acquired through adequate study and conducting your own renovations. 

If you have sales & marketing skills you can earn a ton of money while doing something that's vertically integrated in your investing.Long story short being an agent makes you a better investor & vice versa.

My option, of course not knowing your state laws, would be to simply say know and allow the tenant out of the lease so that you can find a qualified tenant.If you are not legally obligated to accept welfare tenants get rid of them.

You can refi as soon as you qualify, which sounds like it's only a few months away.

HUD determines the guidelines for how the income is qualified, so any lender who underwrites FHA loans must adhere to that methodology.

If anyone out there knows that this type of liquidation qualifies for a 1031 exchange into another investment, I'd love to hear about it.

There isn’t a good answer to this without more information about the investor’s free time available to manage/improve property, current inventory of skills and abilities, risk tolerance, end goal, and time horizon.  

The issue will be whether you qualify as "a trade or business."

I have seen cryers stall.. ie they get a phone call and stall and then 5 minutes later someone comes in and qualifies funds for that sale and then they start.but I have in all my days never seen what you described.. but you know IL  pretty funky with the rules there It does not shock me.. anecdotally  I can recall on a many occasion were my competition was 2 minutes late and the sale was all done and they could not bid because I won the bid and it was over ..