Initial contractor inspection and quote was $11,000 for this 3 Bedroom Bath and 1/2 Home. 

If you have an inspection or walk the property with a contractor or seasoned investor they can guide you in terms of what to expect for maintenance and capex. 

Do I need to have both sign the contract or just one?

I just got a quote for architectural blueprints for permits and engineer stamp for $ 3250.00So, I'm getting that started, while I'm looking for a contractor to do the work, as the scope of that work is more than I have dealt with in the past

If you’ve never had a problem filling it I don’t see why you are stressed about it, I actually sorta enjoy the marketing process. 

I'm currently getting quotes from contractors and general contractors. 

Depending on the price of the total deal, you should be able to develop the other 2 new builds for about $65psf-$75psf with a good contractor.

Value can increase via no rent increases if the industry is going through cap rate compression (dropping cap rate will raise value price).5 yr term baloon is almost always killer as in this case.  7 yr better, 10 yr is best.The todo in seller financed deals:- Increase value via increased NOI and hopefully enjoy free increases from industry cap rate compressoin so that when you apply for refinancing, the appraisal will come back so that the LTV being offered (70%, 75% maybe 80%) will cover the balance on the sellers note. 

Will I be likely to face lawsuits and liens related to the work done by the auction buyer and his contractors (the lien period won't close for a few months.) 

Admittedly I'm a recent transplant from MI so still feel the newb factor, however been enjoying VT, the area & it's people really well thus far.