Outright sale: Cash buyers, because the price point is lower this is very common.4.

Private Lending Attorney Here-First it depends if the person lending the money will be doing this on an ongoing basis - if so he may want to have a separate entity created for that business.As far as documenting the loan - I would recommend speaking with an attorney who regularly handles these transactions. 

However, the issue for me is after doing my numbers he'd still need to be way lower than $175k.

There is no legal limit, but there is almost always a practical limit because a sponsor can only deploy so much money before they have to lower their underwriting standards etc.

I showed her that 5bdr 3 baths in that area are 3.5K-5K and I am charging her 2.8k, which is much lower.

Many investors from California, are investing in the midwest because of the yearly returns making more sense in these lower priced markets.

However things change dramatically when buying an investment property, as down payment requirements do not go lower than 20%-25%.

While conventional loans offer lower down payments, explore various loan programs and down payment requirements with your lender to find the best fit for your investment goals.

Can I prevent the banks from going through foreclosure.The property does have equity in it (based on loan origination date of 2009 for a value lower than the current market value).

Try to get the wiggle room you need, financially, in the contract, to make it worth the transaction.