Greeting Leo,I am in the first stage of this process, I have located a property and have accepted the counter offer from the seller, an REO.

I can't imagine any seller would accept an offer without proof of funds first.

Will the purchase contract from a bank say "delivering clear and marketable title, free of liens or encumbrances" , and if so, then why would I need to pay the cost and time of a title search on a bank owned property...

So unless your rental income is large enough absorb that 25% discount you the difference will be included as monthly debt.Some banks do not accept income from rentals and count the entire mortgage debt against you.  

Property values are subjective and even an appraisal is not always the best estimate of actual ARV esp. if there are a lot of foreclosures in the area but it does provide a generally accepted measure of value.

They technically have another 7 days to make a response.So, what do you think my odds are that they might accept this high bid?  

I know this is a unique issue to the note and the individual, so I'll add a few details and see if there are any suggestions as to where I should go from here.To begin, I'm a note rookie, and I accept all the critical feedback that comes with it  : )   I now know that I was under capitalized when pursuing this note.  

I still consider myself a new investor, but now I’m much more comfortable accepting that l do not know it all, and I don’t need people to think that I do.

I won't accept ANY boarded up houses on the block.

While the first spouse receives the deduction, the second spouse then claims that income on -  Schedule C - and pays self employment tax.It's the exact same result, but you've at least transferred some Social Security/Medicare over to the second spouse for retirement purposes down the road, so that's good.If you're looking to figure this out for being a landlord, then you just put everything on one Schedule E for property you own jointly.