I had never heard that before.. and this has nothing to do with swapping contracts but actually advertising and selling homes whether you own them or take the quasi equitable ownership argument.I would simply contact your State Department of Real estate and get clarification.. this could very easily be why you see no bandit signs etc.

Simply because they have more to lose.

Simply wanting to confirm when implementing this process, we will incur the expenses related to cost of closing 2 times ( once for the cash purchase and a second time for the cash out refinance) correct? 

I've no interest in commercial real estate and consider the learning curve steep enough at this point simply focusing on residential.

Until that point, all costs are capitalized as start-up expenses and deducted in the year in which your business activity begins (i.e. going under contract).Otherwise, people would simply deduct tons of business expenses and never actually enter a business that generates income, therefore providing for a tax shelter which of course is illegal.

The tax lien simply gets paid off at settlement out of the sellers proceeds.

It could simply be that red flags for you is just how we do business here. 

Sometimes, those "cut" times are simply aren't true.

I currently have about 12 other commercial loans spread over 3 different lenders, and none required a 1/2 year prepaid taxes.My point would really be simply that what you experienced isn't a federal requirement, so it shouldn't be stated as "universal fact". 

My  contractor has advised that it would be more cost effective to simply furr out the walls and put up a nice smooth dry wall instead of trying to even out/improve the current situation.