What are the consequences of not following HUD's recommendations to the letter?

Thus it might have some bad consequences to all the investor. 

I am interested to learn about the tax consequences of down/payment/ installement payments.

Per Section 15-112, you can rely on this document as your original:“If a law requires a record to be presented or retained in its original form, or provides consequences if the record is not presented or retained in its original form, that law is satisfied by an electronic record retained in accordance with subsection (a) of this section.” 

So I would not say I would never advise a Seller to accept an offer with assignee added but would definitely fully inform of possible negative consequences.

How do I go about getting out of this deal with the least tax consequence for me and my partners.

Consequently, I believe we have much fewer evictions than in locations where the laws favor the tenant.

A 3-day cancellation notice, informing you of your right to cancel your contract if you signed the agreement in your home, or at a place other than at the contractor's office or business;All warranties on the owner's rights; A statement warning, in ten point bold type or larger, directly above the space provided for the signature, the following: DO NOT SIGN THIS CONTRACT IF THERE ARE ANY BLANK SPACES.Whether any lien or security interest is on the residence as a consequence of the contract.An enumeration of such other matters upon which the owner and contractor may lawfully agree.Any other provisions otherwise required by the applicable laws of the Commonwealth.A clause informing the owner about: any and all necessary construction-related permitsthat the contractor must obtain such permits.that owners who secure their own building permits or deal with unregistered contractors will not be eligible to access the Guaranty Fund.Acceleration of payment: No contract can contain an acceleration clause that would require any part or all of the balance not yet due to be declared due and payable because the contractor deems himself to be insecure.

Unfortunately however, the opinions of those in positions of power over us can and often do have severe consequences to those they choose to target.

(Dad also absorbed the tax consequences of that equity gift.