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The MLS price is not attracting any offers, so they go back to auction with a lower reserve price attempting to unload a stale, non-performing loan. 

The house will need some extensive rehab; expenses that we are concerned about paying out of pocket for.

What contingency does a wholesale use in their offerWhat happens if the wholesale does not re-sell or assign their contract, is the seller mad, disappointed, ready to file for specific performance law suit? 

They have no way of knowing how long it will take them to sell their home and be able to perform on your contract.  

The general goal is to purchase *** FIVE ***  4-Plex's worth $600K each, where I put %20 down (so $120K down on each).The stretch part of the plan - I'd like each 4-Plex to cash flow $2K a month.

However don't think they just "happen" and are reported like your primary residence exclusion.  1031 exchanges must be performed for you by a qualified intermediary and put in place prior to the sale of your old property.  

When you sell the home, most buyers perform inspections and so work has to be done right.

Definitely get the owner to get the permits if you can, otherwise contact the inspector and ask for an extension on the permit or a review of the last submittal. 

Need some help analyzing.Property Valuation = 66kNote's Unpaid Balance = 25.2kNote Sellers price = 21.6k (standard 85% of UPB)Sellers claims note "performing", but has unpaid taxes of 8.5kLoan maturity in 5 months with balloon of 25.2k paymentChances are this will foreclose!