When I do this, my agreement "settles" any lease issues like the deposit and outstanding rent balances by them vacating and me giving them $X.

(Damn, this book is good and I'm only three chapters in.

PM me I have an outstanding Attorney who can help

That stuff is outstanding, can be cut to length(comes in rolls), wrapped over itself, is self-regulating (doesn't heat up unless it's cold) and generally fire-safe based on the way it works. 

Borrower has outstanding federal tax liens, judgements, code enforcement violations that are not paid, etc.

are they delinquent (which would create a tax liability for you), how much will your insurance be and more importantly are there any outstanding insurance claims/liabilities with the current owner? 

From a business viewpoint, your rent will be backed by your state government, but I can see 6 teens doing serious wear and tear, especially since many kids who have come from the foster system are not always outstanding citizens yet.

This is $500k more that what you paid for it in 2011 (damn, I'm envious, this does not happen in Texas!) 

Who usually pays for the HOA statement fee (to determine the transfer fee, outstanding dues, etc) when buying/selling a house?

Outstanding!!!