Your offer to purchase should include a requirement that the Seller provide all documentation and agree to sign an estoppel certificate (also called an estoppel form or agreement).

The screening they offer works well. 

In some cases, I see that the buyer offers a substantially high price on the property to entice the seller, but that price is offered as a balloon payment in 5, 10, or 15 years.

I responded to her FSBO ad and made my offer which she happily accepted: a 36 month lease option; I'll bring her mortgage current, (1 month, $800), and continue making the monthly payments; option to purchase price of $88K, (my estimate of value, $100K); and I had the right to buy, sell, sublet, or assign the property at any time during the 36 months.

If you are willing to put down a larger down payment it might make sense with the flexible underwriting they offer, especially if you are going to run it as a MTR. 

We welcome any suggestions or insights you may have Additionally, if anyone has information on the approximate cost of building a duplex and triplex in California, we would greatly appreciate your input.To provide context, neighboring properties in our area offer insights into the local housing market.

You'll also receive a lower ranking on Airbnb and other listing sites because you don't offer an amenity that everyone else in the area has. 

View of SF Bay2.40M (1st appraisal) 2.45M LIST (+400K) = 2.855M OFFER2.65M (2nd appraisal) 2.70M LIST (+400K) = 3.15M OFFER ??

Assuming credit is healthy there are lenders that will offer more favorable terms. 

If for some reason I can't get a utility turned on, I assume that the utility itself inside the house is faulty and will need repair/replacement and adjust my offer accordingly.