I have a duplex under contract that I anticipated paying $3,300 in annual property taxes (using the Indiana online property tax estimator), but they came in at $2,650...so maybe its already designated as a rental property?

There's a "rare" case of the property owner declaring bankruptcy before the day of the sale... you can lose your entire bid amount that way... that's atleast what a lawyer stated in a consultation.3) you call the IRS lien department they can fax you a paper document stating if there is a lien or not its best to have this - unsure about the 120 days start date but we can safely assume it starts once the sale occurs or the date its switched legally in the clerk systems.4) State specific - FL the mortgage is wiped out and all liens (excluding municipality liens)5) No they're giving you a "tax-deed" - see my recently purchased tax-deed below (it may look a bit different after the county officially enters it in their systems which happens around 10 days afterward in FL).6) it depends on how your state does their tax-deeds if it has an online system you can literally see the mailings that have occurred and you'll know if the proper procedures were taken.

Personally, I would like to legally avoid as much tax as possible.

In my opinion, she has not legally surrendered her possession of the rental unit if she has not returned the keys. 

While wholesaling itself is a completely legal and valid practice, when you start getting creative, you can easily start making some moves that can land you in hot water (if you get caught). 

I would go line by line through each property to make sure they made the adjustments property (like condition, the garage you mentioned, etc).It's my understanding that the appraisers can only count legal sq footage, bedrooms, baths, etc.

Since it’s often a “he said she said” situation, just like in your case, they don’t make the legal decision of who’s right, and they don’t want the liability.

There are plenty of creative ways to fund a deal - many are legal and totally fine, but as a realtor you need to be kind of careful about how you get creative. 

Can they, legally?

I was first introduced to real estate at about 7 or 8 years old mid 60s  when my dad worked for a land sales company that was selling lots out by Loch Lomond reservoir and the office was at the Trout Farm inn  :)  those are probably still legal lots of record but probably not buildable . you could sell those back in those days.. but the redwood trees on them are probably more valuable than the lots.