Ultimately the sellers are going to find that with time on the market their home becomes less appealing and by starting out at an inflated cost they will be hurting their chances to be sold at a fair price in the end. 

Ultimately, the choice to sell your home with a cash home buyer or via a traditional sale is up to you!

I will have a solo 401k soon, and I already have an LLC that generates active income.My ultimate question is this; is there a way to use my solo 401k to reduce my current tax liability?  

Now my current plan is to purchase more rental property, however I would ideally like to buy a property to live in within the next 5 years... my dilemma is how I should proceed to limit the debt I tie to my own name, assuming this would make it harder to finance future deals and ultimately my ideal living property.

It's mutual among all parties and you will have to explain and intervene to avoid conflicts that could ultimately escalate and require you to take action. 

That is ultimately your objective generate offers and get this sold.

You'll ultimately get a lot of subjective opinions that'll just push you towards the decision you already made. 

I do a lot of buy and hold here in Bakersfield, due to population in neighboring cities I don't recommend you purchasing in Taft.at a $170,000 you can purchase something similar here in Bakersfield but will ultimately be cheaper maintenance, management, etc since most of the kern population is situated in Bakersfield meaning handy mans and other repair services wont bump up there prices due to travel. also being in Bakersfield you may use a local property management company that may perform an exceptional service due to the distance of the property rather than having to travel.I hope this information helps

So ultimately you need to focus on your goal. 

I'd suggest reading: "The Ultimate Beginner’s Guide to Real Estate Investing" from BiggerPockets.