Is it true the IRS, in the 120 day period after the property tax lien foreclosure, can still redeem the property from the lien holder, who now has taken possession via the foreclosure?

At that point, sellers and buyers and lenders will be able to get title insurance, but not before.The "clock" depends on three years of lawful, exclusive and continuous possession starting with the date that is three years after the auction. 

That interest does not include possession.  

I personally haven't used lease options for many years though, I use the standard OREA purchase and sale agreement because that's what everyone (buyers, sellers, realtors, attorneys, lenders etc.) are used to seeing.To turn the PSA into a long-term agreement all you have to do is add a possession date on schedule A that's different from the closing date.

If there is anyone in LI looking to partner up i do possess computer and web skills that could be of use to someone in exchange for just being around someone with experience.

Some of the men there don't even possess a driver's license, or may not speak English.  

Its almost impossible to fully evaluate damage if furniture and possessions are still in the unit. 

Also, the terms of the deal are more specific (contract specifically addresses occupancy status, leases, possessions, liens, violations, designates responsibilities and other contingencies). 

What you expect Seller to do before settlement, 5 Possession terms, 6.

As there is no equity, they are very likely to do that.You may need to explore further options if he filed Chapter 13.Either way make sure you pursue your options to collect as much as you can from the court, although with a Chapter 7, that's likely to be near zero.With possession, you can start collecting rent.