Use your w2 to qualify for a mortgage.

I think the buyer either a)will  pay a fee to a buyers agent making their offer weaker due to net out of pocket costs or b) the buyer will wrap the mortgage in with the seller subsidizing the buyers agent fee. 

It is certainly a possibility, but I wouldn't say it probably will happen.This depends on so many variables that are mostly controllable based on proper market research such as a quality property in a great location with great amenities.

I offered two offers initially, a conventional mortgage offer and a seller financing offer.

Make sure the money you receive from rentals pays for all of your out-of-pocket costs, such as upkeep, insurance, taxes, and mortgage payments.Underestimating the Outlay: Add up all of the costs that come with owning and operating rental properties, such as capital expenditures, repairs, vacancies, and property management fees.

It may be harder to set off the entire mortgage payment with house hacking, but any amount that you can lower your living expense is a win while simultaneously having your property appreciate.

My other option is to pay off the balance on one of our mortgages and cashflow more. 

I am in orange county, specifically Santa Ana and could not find a bar or coffee shop where real estate, escrow and mortgage professionals meet to network.

I agree, if i have done my math right, i should be able to buy 4-5 houses with the 6th house having a 250k mortgage due to the 1031 exchange rules to avoid the boot.

This can get complicated if you are racing against time between getting it sold versus the banks take over.Can you get it sold at a high enough price to pay off the mortgage or is the owner under water?