What would be your approach to solve this problem? 

Do you think this type of approach would work, and is it currently being used in some form?

Is using an insurance broker the best approach for sorting through this?

Someone will challenge it and I believe win in court.

I believe growing up in a family of woodworkers and handymen has prepared me for these challenges, as I've worked on many houses and projects before and helped build a rather gorgeous 3000 sq/ft log cabin starting from foundation up as a young teen.

On the flip side if it was significantly distressed it's possible that your hypothetical $30k actually added more value than that to the property. looking at it in terms of percentage isn't really the best approach to look at how much value you've added to a property. 

Clearly people are trying to take advantage of a hot market but what’s the best approach to take to let people know that the house is not worth anywhere near what they’re asking and basically should still be priced right where it last sold in April?

Based on the latter approach, you can essence acquire an infinite number of properties. 

I've been given lots of advice but we have some challenges.  

Once you approach 10 gpm electric power demands would be prohibitive for standard residential electric services.