Lakewood has a LOT of duplexes but what worries me is how old they are and it is sort of a party city with lots of younger tenants. 

Congrats Jodi,Sounds like you got a deal and times it right Hillary ,I’ve been listening ok’ing at flood deals for a while now , from the deals that came my way the wholesalers are looking for 60-50% of the ARV , that doesn’t leave you much room for error , market correction or stigma of a flood home even in a good area .Take off 10% for commissions, legal  & closing on sale , you are looking at best a 12/20% return on investment .Now imagine if the mold situation comes or contractor goes over budget , you may be stuck holding a wet bag If your plan is a rental than at least you have a plan B in place For the best upside of 20% I’d stay clear Of course if you can purchase at 35/45 From ARV that may be worth considering IMO the Flooded homes are going to be in the market for a while - based on the fact many owners are just hanging on and not paying mortgages .

I know there is a legal contact in place but still worried of worse case scenario.

Where it gets legally weird is that her parents took over the apartment, as they were paying everything and the executors of her estate.

@Andy Bondhus I don't know the legality behind any of it but I do know that a lender can offer a program with specific features, in this case escrow, and if you do not agree with it, they do not have to lend. 

Account ClosedWater lien has no legal right to the property, if you pay for it as a 3rd party.

Perhaps a nice 1950's built bungalow.Always hire a 3rd party property inspector to give you an unbiased feel for the home.

If they are not licensed real estate agents, is there a way to legally incentivize them?

I have set it up where I will be responsible for the title policy as it is my understanding that this creates the need for only one title policy in a double close and not two (of course need to confirm with title co) during a process like this.My questions are this: -What to watch out for when doing this, are there are any legal issues with marketing a short sale like this?

So that part is fine.