The best question to ask yourself is if you have the time/personality and contacts to handle it if things go wrong. 

Are the water pipes in the house large enough, or in good enough shape to handle another bathroom.

Or do you have a trusted group that you can contact for easy to handle issues (toilet clogging, etc.).

On the day of closing the title company will handle all of the paperwork and you will collect a check for the difference in prices between the two contracts.

No worries, let your lawyers handle it from here and each step you can ask them again about cash 4 keys, dropping the rate as you go as you spend more money on legal fees the money you can give them gets lower. 

That should of been handled when you bought the house

It's also for people that just do not want to handle that part of development and source it out so they can spend more time on finding and doing deals.  

Other companies may handle those two issues differently so you need to be clear to the agent what the situation is and have them spell out how their policy would respond.

@Kim Meredith HamptonAt this point we have no idea as to whether he has handled it appropriately or not.

@Joe Villeneuve  To expand on my previous post, for every money investor there are 20-30 "investors" willing to manage the property, play bird dog, oversee repairs, oversee accounting, handling evictions, etc.