I'm trying to be ethical and honest but at the same time don't want to throw any red flags up with the seller in explaining my reasoning.

Recently it sold, price unknown.Rent-o-meter estimates $638 – $837 If I were to buy & hold this property I would make it section 8 ready.Tax assessor says it sold for $143 in 2002 then $192,750 in 2004 to the current owners.Record Deeds Info / aka Red Flags:'05 Well Fargo Mortgage 207k'05 Mortgage Discharge Mers Inc (3x)06 Lien Municipal (City) 2.6k due06 Wells Fargo Mortgage 228k till 11/203606 Wells Fargo 207k Released08 US Bank National Assignment'11 Intent to Foreclose (03/25/11 Auction Cancelled)'11 228k US Bank National Citigroup Mortgage Loan(Common sense is telling me they refi-ed about 30k a year after buying & I'm thinking in 3 years they couldn't have paid their mortgage down from 228 to 44k) but my real estate knowledge is limited.

I don't know...1) the cost of developing the landThere is an old house that sits on one part of the land so I assume it has utilities/sewer lines2) the cost of the building - for high end townhomes, should I use $100/square feet or is that too low3) what will be a typical ROI that you will say "Yes, this project is worth it."

I would appreciate any information that I should be aware of in this type of transaction specifically, any "red flags" I should look for, specific questions to ask, etc.

anything going wrong could put me in the red...How sad is that?  

@Victoria Bonhomme  price per square foot is a TERRIBLE metric for figuring prices. 

Therefore, we saw the property and liked it, so I ran deeper numbers on it without listening to the original red flags.

Here red the issues that I see:1) Is this a CA conservatorship?

My Realtor is concerned that the cash is not in my name and that if we provide a bank statement from the lender it will raise a red flag with Fannie due to the lender's name not being on the deed.  

the wholesaler said that i wouldnt be able to see the lease agreement until i decide to buy the house..... red flag??