So my options are to wait for the title claim decision and purchase both of the lots after the issue has been resolved, cancel the sale and wait for the property to go back to auction, or purchase the one lot and hope that I can work something out with the current owner to purchase the remaining lot. 

I would only do this if your tenant had a short term situation that rendered them unable to pay rent, and it is now resolved (like being in the hospital, unable to work, but now back at work.)  

2) Fixing the fireplace won't resolve the tenant's underlying complaint that its getting cold without a functioning fireplace.A fixed fireplace won't generate that much heat to warm the rental because the fireplace was designed for only low volume natural gas.

If the tenant is agreeable to that arrangement, you save yourself a bunch of time and get the problem resolved. 

A good broker, which I can recommend, will resolve issues for you, not create more.

Like you not only are going to offer them cash thus making them not have to deal with a realtor or any additional fees, but other things like maybe an additional $1k cash on signing, or you will help with the moving costs.I am always under the belief that it should be friendly and that you want to help resolve their issue, and financial struggles.The other thing to take in mind is what kind of list you are pulling, and be kind to those issues, and offer assistance.Here is an example we often use.Dear <> <>,I am interested in the property you own at <>.I understand that selling your home can be overwhelming, and would like to point out the major benefits of working with instead of selling your home through a realtor.• You receive a Fair Price with no Real Estate Commissions• We pay all your Closing Costs• No Inspections or Appraisals• Close on the date of your choice• Sell your property in its current condition, no repairs necessary• Remove the belongings that you want and we will take care of the restIf you are interested in selling or would first like to discuss options, contact me today by calling or texting <>.

I hope tomorrow I can get this resolved and push forward.

If there are any drawings that the architect needs to submit for approval so yes but it looks that the only hurdle will be resolved and signed by a PE (Engineer).

Can someone advice how I can possibly resolve this dilemma. 

They will not be able to go FHA or VA without the problems being resolved.