It even sounded like the director of the SDIRA would be the one contacting people to do repairs if needed.

Not sure why would anyone give them a second chance unless you are a slumlord or abusing the government rent support system which it sounds like you are considering. 

Since that is the option for you it sounds like, take the deduction now, get at least the company match, and let the funds grow tax free.  

The situation sounds like a planned re-trade. 

@Travis Schmidt, first I would carefully evaluate the repairs and the costs because that sounds like an EXTREME amount of damage based on those amounts.

Yep, sounds familiar  :-) ....That's what we get for not going inside a property before buying it!

Sorry if I read too much in btwn the lines your initial post sounded like you're worried.

If you have money for down payments and construction, funding will be fairly easy with a hard money lender (also need a credit score of 620-660 min).

It sounds like you got a word-of-mouth acceptance, and your agent should have pushed hard to get the signed contract completed so that the sellers would be in breach of contract by accepting another offer, and you would have grounds for a lawsuit if they did.

I agree that you may be able to do that, but it may not be easy.