There is no appellate authority in the tax sales context.

REP would come into play if you have losses - expensing items creates a larger net loss and REPs losses aren't capped at passive activity income.

You would have to check with local authorities on that.  

In Texas we do Disbursement Authorizations directly to the title company so they split and make the payments to the various parties. 

It can be a pretty big deal and isn't anything worth playing with. 

I assume it's in the lender's best interest that I close after this policy comes into play, or is that not the case?

We did research on area and we knew there are bad elements but i think we underestimated the problem (You know mind plays with us when we have already decided to do something especially when you have overconfidence on yourself ).

A kid playing outside can break the window and you will collapse in tears. 

So I was unsure if that would play a role and should have mentioned that.   

CHA (Chicago housing Authority) is tough in itself to do business with.