can you subject to / take over their existing mortgage?

Also, they had never before mentioned her doctor was "out of town," they merely stated the letter already existed and was "on its way." 

In my opinion the cost of an existing structure and the rehab cost are phenomenal - might be more profitable for a simple house with rental quality materials?

If it's not in the contract, it doesn't exist.

Similarly, they will severely discount any amount owed and focus on what the home is worth in it's existing condition. 

It exist, but can never be achieved.

Can you provide some rough estimate as to the locations where the problem tends to exist; for example, bathroom - 80%, kitchen, 10%, basement 10%.2.

., etc.Yes, a new foundation (among other things) is required.There is a very real cost to the developer in tearing down and disposing of the existing house (tipping fees can add up to a tidy sum).  

Then you can sell off in 3 to 5 years for a premium.Value add is maybe getting something 50% occupied at a 6 cap on existing income but by 90% occupancy you have a 10 cap that you sell in the market for a 7.

Interest rates are reasonable today (though the market in many places is saturated), which means that instead of owning a finance-free REI property for $400k may not be as favorable as financing 4 deals for $400k, down paying $100k each (25%), hopefully cash-flowing, and building equity.