My monthly mortgage payment is around $1500 (15 year loan at 3.375%) including tax and insurance. 

Check the crime and schools, state, county and city property taxes, insurance rates, tenant/landlord laws and rental market. 

This will put me at approx 26k for normal financing.So I asked him why is the closing cost so high and he responded:Bank fees are approximately three to $4000, transfer tax is 1% of the sales price, and title insurance is typically 1% of the sales price.Does this sound fair?

However you are fined by the govt for not being on Medicare and insurance companies won’t cover you for expenses that Medicare should pay.  

The house is in the probate process and the probate judge just released the house to be sold.The house was built in 1972 and has not had any major upgrades since it was built and there is a plumbing issue going on.

When looking at a property, insure that you are figuring 2% of assessed values regardless of what the current owner is paying.Understand tenant-landlord laws in your markets.

Closing costs for me average 4-5k this includes pre paid insurance and taxes

Insurance, taxes, mortgage, and park fee were $8500. 

Rent is $950, mortgage $512(taxes and insurance included) So, there is a good chunk of equity in that property.

If it's not the tenants fault, you can file for insurance or out of landlords pocket and not tenants responsibility.