Many tax sale properties derive from estates where the heirs take no action and the property goes to tax auction.

Previously they were willing to show the house with prior notice.

The life estate will spell out the obligations of the step-father (taxes, utilities, insurance, upkeep - or even a base rent that you could use to cover those costs).

I live in one unit and the other 2 are rentals that had been rented out prior to 2023.

What I have done in this situation is I acquired the property and then had the individual sign a long term renewable lease and the cost was $1/yr + the costs of insurance and taxes. 

I find that the Freddie interest rate is 90% correlated to the prior quarter 10-year Treasury, also shown in the graph.https://mf.freddiemac.com/aimihttps://www.treasury.gov/resource-center/data-chart-center/i...

It encourages a hesitant seller, but their agent will know what’s going on anyway because you or your agent had a prior conversation with them. 

Is it maybe because this income hasn't been captured in a full year's taxes yet?

(tax & municipal liens often survive the foreclosure - so if you buy one with those on it -  you are on the hook to pay them after the fact.)  

You also have to realize that even if you are not using the entire heloc limit "Some" underwriters still calculate the Maximum payment into consideration.There are some ways to pull money out of a Heloc and deposit it into a savings/checking account prior to application to satisfy the PITI reserve requirements.