If Leo's service buddy is willing to sign and walk away, could @Leo H. if he still has it and is willing, try to make this situation right (or more right anyway) by giving up his $2K fee and send the money immediately to the bank to prevent foreclosure and help the original seller start the eviction process with tenant in place? 

Given, that, and assuming your debt to income ration would not prevent you from getting another mortgage, you best option would be to save up the down payment for you next purchase.

But that's unlicensed brokering (which is ultimately all wholesaling is, though regulations and codes of conduct would prevent an agent from doing this deal without making the seller completely aware of the true value.)  

The tenant was friendly and although his wife did have some health issues, they were not the sort to prevent a showing.

Here we manage maintenance risk through a thorough preventative maintenance system (I used to be the Street Maintenance Manager for the City of Lancaster, CA) and we shift risk through the lease-purchase by receiving a large non-fundable down payment and making the tenant/buyer responsible for all maintenance.We set the purchase option price at a premium of 18% since the tenant/buyer has 30 years to execute the option. 

Pest control has sprayed everything while the walls are opened up to hopefully prevent problems in the future. 

Use a FICO Improvement coach like Blair Warner http://upgrademycredit.com/services/The terms I use are term 12 months, with possible extensions, 3% down, market rentsales price =  current appraisal or within 5% or current appraisal.Understand you have to also look at what the IRS considers a disguised installment sale and to prevent that.See http://www.biggerpockets.com/blogs/3/blog_posts/40...Best of luck!

I would also ask the tenant to explain the circumtances surrounding the shooting/robbery to see if there was anything they were doing, or about the property itself, that attracted any undue attention from the suspect or that could be changed to prevent another similar incident for happening. 

I just bought a small rental home that has asphalt shingles for siding.

It allows me to preserve my margin, have the money to continue repairs and prevent an issue where the tenant becomes so below market that you lose them to raise rents to market level.