Or maybe the ESA letter is from a bogus online source that isn’t acceptable.

I think a 1031 exchange wouldn't be a bad idea if you're not making much on the property, and are worried about big repairs coming up in the near future. 

Imagine these older folk's financial planners did not plan on high inflation. 

I think @Jay Hurst nailed it on the head.

@Sandra Ho, It sounds like you are talking about late payments on their credit report for things like credit cards, car payments, student loans, etc.

21K seems to be on the very high end for everything.

My title rep pulled a property profile on the house and it shows as a 2/2. 

@Or UziCongratulations on entering the U.S. real estate market from Israel!

If everything goes right I will be able to refinance and will have created 25% equity, or I may end up having to bring $10-20k to the refinance to get the 75% LTV depending on the appraisal, but even if that's the case it's still a great deal.

As an agent who works with a lot of investors, I have recently started to notice more and more that people will evaluate a property based on its current metrics, and write it off.