I would propose this deal; If that guy finds mold then I will take care of it, if that guy doesn't find mold, then the buyer takes the place as is and we both accept that the first guy was BS. 

I think that's 15%, but this may have changed in the new tax law.If you've not been claiming the rental income on taxes and  carefully tracking the assets associated with this property you will need to do some work to sort this out. 

Who cares if the market is hot?

If all you care about is cash flow then 1 is the way to go.

For lead time to closing could be 6 months to 1 year sometimes as buyers do careful planning when investing millions of dollars down on a purchase.The upside is when you do close some you can have years worth of income while working on the next deal.Example if I make 100k commission on 10 deals that is 1 million pre-tax.

Is there anything I should be careful about or watch out for?

He insured his family was well taken care of with having a home to start with!

Foreclosure is extremely state-specific as well as county-specific and sometimes city-specific, and you need to study the process carefully before you wade in and bid.

Of course if you have either A class properties or enough for the property manager to care it might be easier.

The communication at this point is a careful dance.