With all that said  each state has regulations, you have to comply with.

What is the best procedure for taking the money from the deposit?  

I only use them for 6-8 months because the regulations require 6 months to do cash out refi loans.

These questions could be decided by a jury.Legal questions are determined by a judge, such as evidentiary and procedural issues.If there are no issues of fact to be decided, you can file a "motion for summary judgment," which states that there are no such questions to be decided.

There are some guidelines to follow in order for "vacation property" to qualify in an exchange as replacement property:According to Revenue Procedure 2008-16 - The purchase of a vacation property or a second home will qualify as replacement property in a tax-deferred exchange transaction if the following safe harbor requirements are met: The subject property is owned and held by the investor for at least 24 months immediately following the 1031 Exchange ("qualifying use period"); andThe subject property was rented at fair market rental rates to other people for at least 14 days (or more) during each of the following two (2) years; andThe investor limits his or her personal use and enjoyment of the property to not more than 14 days during each of the following two (2) years, or ten percent (10%) of the number of days that the subject property was actually rented out to other people during each of the following two (2) years. 

Sometimes the tellers just aren't aware of the procedure for having tenants deposit cash into a landlord's account. 

Even without that, an LOI is not an offer, and a 70 unit is not a SFR  most agents play with and then uses and standard procedures are different.  

What I found was that commercial loans are so much less regulated than personal loans therefore making the terms more flexible.

My opinion only, since I am in NC where lease/options are statutorily regulated.

Regulation S is something you need to ask about and look into to protect blow back to domestic investors.