Essentially they want to protect themselves in the event that I cannot refinance (or sell) in 12 months to pay them back because the issue isn't adequetly fixed.

That is essentially what I've been doing to build my rental portfolio (buy-rehab-refi).

Why would an agent want to chance losing their MLS access, and essentially their real estate sales future?

Thus the interest rate is essentially your tax rate + the 4-6% most 401k loans cost.A self directed IRA is absolutely a viable option.  

Here are some references for ambitious learners.Uncle @Bill G above likes to lecture.http://www.kapre.com/real-estate-coursesget the broker course books. aint easy.Bookshttp://www.amazon.com/Blacks-Dictionary-Standard-N...http://www.amazon.com/Examples-Explanations-Real-E...http://www.amazon.com/Dictionary-Estate-Terms-Barr...http://www.amazon.com/IRA-Wealth-Revolutionary-Str...http://www.amazon.com/Finance-Real-Estate-Place-Ti...http://www.amazon.com/Retiring-Right-Third-Success...http://www.amazon.com/NLP-Essential-Guide-Neuro-Li...http://www.amazon.com/gp/reader/0793136601/ref=sr_...http://www.amazon.com/about-Escrow-Real-Estate-Clo...I have been at this 32 years and I am still learning.Bill G I think is 80 something.

The good thing about this (or bad) is that I will essentially just be paying for any hassle or headache the comes with these things...

This comes directly from the IRS website and was the result of a court case:"For example, In Smith v Commissioner, 300 F 3d 1023 (9th Cir. 2002), the court concluded that the replacement of the aluminum smelting cell lining was a replacement of an essential component of the cell, extending the life of the cell and requiring capitalization."

I have been buying REO for rentals for the last 3yrs ...offering big EM, cash closing, no contingencies helps to win ...my problem is the following : I have no leverage over contractors ...I will not offer them steady cash flow giving them work on 3 rehabs at the same time throughout the year ...so they will quote me homeowners prices ...5K for you might be 15K for me ...it is essential for me to know exactly what's wrong with the property before I go to closing. the only way to make money on my first real flip would be to buy it right and do a thorough inspection...thanks all for tips

@Jerry W. 30 Years at 186monthly mortgage, interest rate is 6% two units 500&600 possible third unit I'll most likely live in it, it's essentially a turn key we'll managed ARV is 72k

As @Giovanni Isaksen mentioned, a sewer inspection is essential in the due diligence period.