This included reinforcing and lifting the center basement beam of a 100 year old three story house 3.5 inches (we were doing extensive cosmetic work as part of the project, so the paneling popping of the walls wasn't a big deal).

You would be liable for all the damage, as Jason point out, and it could be extensive.

As we come nearer to the closing deadline, I requested a contract deadline extension from the seller which they willingly agreed/approved.

Same goes with if the owner had done extensive capital repairs that wiped out most of their cashflow, the property would still trade off of it's NOI (although the broker may try and sell you on "pro forma NOI based on the renovations). 

The closing of the replacement property must take place by the earlier of (1) 180 days from the sale of the original property, or (2) the due date (including extensions) of the tax return for the year the original property was sold

I have my dad (contractor) to hopefully help with any extensive repairs that may go unseen during home inspection/walk through.

It is a pretty extensive rehab on a 2 flat.

There is an extension of the argument that the IRS will never allow to happen. 

It usually takes about a year for an individual to be granted the assurance that they meet the requirements.One route is to have someone come over on a B1/B2 with an extension.

@Cathryn BurkeHi Cathryn:There are lots of different threads with extensive discussion on this subject.