It is all about setting expectations and enforcing consequences. 

Consequently, they would be at an economic disadvantage and their margins would be smaller.   

But if its really worth $400K and you sell it to her for $300K you're giving her $100K and there are tax consequences for that. 

What are the legal consequences to the seller if he backs out of the deal?

What are the legal consequences to the seller if he backs out of the deal?

This would mean that there is no history of the LLC that the buyer is unaware of.That wouldn't change the tax consequences of the sale. 

Hypothetically speaking, are there any big consequences that can arise from using the proceeds on a down payment?

Consequently, without recapture, you could realize no economic loss in buying and selling the machine for $10,000, and yet reduce your cumulative federal income tax liability by $1,960 ($3,960 saved as a result of expensing, less $2,000 tax on the gain). 

I like your point about how some regulations can go too far and cause unintended consequences.

If you are talking about a nationwide real estate market, my assertions is: that a nationwide real estate market does not exist and the 'cycles' you see in the Case Schiller are the second and third order consequences of fluctuations in the greater national economy, which has demonstrated cycles.