Let them know that a few things came up, know how much it's going to cost you, and see if they would be willing to do some of these repairs as contingencies to closing or if they will get you seller credit towards closing costs and buying down your interest rate to save you money at the closing table to put towards the repairs.

Randy  I dont think most folks realize the points our making  I have had 3 attempted suicides in homes i bought at auction or pre auction one successful and that was a vietnam vet who I let live there rent free for almost a year I would talk to him twice a month asking him to please move on we cant let this go on.. finally we had no choice but to do a FED and he still would not more when the cops came to escort him out.. ( and my secretary was there ) they opened the door took a look at what was on the kitchen table told my staff person to go get in her car.. found in him the back yard suicide by gun.. there is a very grimy side to foreclosure bizz.. but I 1000% agree with you.. that the homeowner if its an owner occ deal is going to be extemely emotional irrational violent etc etc. this business is not really a beginner business..

@Mike Armstrong market as a whole has a significant inventory built up between new builds and folks taking money off the table.

All exit cap rates are somewhat educated guesses and IRRs are the easiest and most manipulated metric used in proformas of any investment type.Instead of picking a number from thin air or just throwing 50-100 bps on it (standard practice and certainly nothing wrong with it) instead use a sensitivity analysis table and look at a range of 200 bps either direction in 25 bp segments.I personally think today that we will see lower cap rates in the future.

If I chose to leave rents where they are, I would be leaving over 200k in forced appreciation on the table.

Where you are going to want to focus your attention is on the leads/skiptracing facets.  1st, unique and proprietary lead sources are hard to come by and expensive. 

Is this a unique tax that's only applicable when using an ira as the down payment?

The situation you describe is not unique to this area.  

If so, you are probably leaving a lot of money on the table.

It is just a table I create in Excel with what is due when.