Assuming he accepted your offer of $21k I would keep it as a rental.If the ARV is $34k as you mentioned you could refinance at 75% LTV.This would give you all of your money back and it will be cash flowing.That leaves you with zero money in the deal and an infinite ROI.You then have that $21k free again to buy another property.

Personally I would not do a deal for $100 a month on a $120k property - but this is situation dependent as I mentioned above. 

I only mention hitting me in PM's or FB so it doesn't spam the post honestly. 

I think you're stuck in a tricky spot with as @Chris Volkers mentioned you've got the nicest home in the area and there won't be many good legitimate comps.  

He did mention that there is no immediate issues near the house that would cause this (like erosion or similar issues) so it’s likely just the natural settling of the structure. if we had gone ahead with the leveling it would be around 18k. 

Part of this is developing a tight marketing funnel mentioned in the latest Bigger Pocket Pod cast with Paul Thompson. 

The investor also mentioned that they wouldn't make an offer until after they had the property under contract but that seemed backward to me.

I think (not positive) Brandon Turner mention in one of the podcasts that this is what he does and I am curious if this is common.

I will review my state rules again, I don't remember seeing a mention about discounting rent. 

Scott's book and some other online resources would be brought up so let me mention that I've already read all of those during the past 6 months of my education phase.