Or should I hold title until the buyer obtains bank loan and pays me off to transfer title. 

I personally don’t prefer paying more than $35K for $600 rents.

I'd like that to be financed as well somehow, and it seemed to me like a private lender would be the best way forward for that, but all the profit on the BRRRR is stuck in the deal as equity, so paying the private lender back seems challenging to me. 

(And offered to pay to fix it)What concerns me is she did not reach out to the person below or contact anyone .

You are definitely getting swindled and should of only been paying $1,800-$2,00- until contamination was found.

Especially if you are willing to pay 5% already.

I also wouldn't consider that part of my investment because I'm actually not taking money out of my pocket to pay it down. 

Seller is paying the buyer's broker at closing (ME) $8250 and 'contributing' another $8250 towards buyers closings costs. 

Either the homeowner loses $300k in equity or pays $120k to pay off a $500 lien. 

Explain the damages that can and will result and that he/she would be responsible to pay for any damages.Most likely probably doing it to save money in heating costs.