I ended up reaching out to a developer nearby who is going to buy and utilize the land to its highest and best use, given the circumstances.

The inner skeptic in you will always find a reason not to buy, even in the best circumstances. 

Almost all renting is done July 1st--don't want to miss the boat and go off cycle--so the question has some urgency.So--the dilemma I guess is are we priced appropriately, but just expecting rental inquiries too early given the odd circumstances? 

Michael,Jay is simply pointing out that if you sell the property now (or within 3 years), you can take advantage the 121 tax law and that your CURRENT circumstance would not allow for a 1031 exchange .

sound like you have extenuating circumstances for not moving in.. those that get in trouble use these owner occ loans then put them right into a rental pool with no intention of moving in

Of course each borrower has their own specific circumstances. 

Originally I came in with an all cash offer for significantly under purchase price, after in contract due to a change in circumstances we had to change to a traditional mortgage.

The problems stopped, and due to other circumstances in their family they're voluntarily leaving at the end of december.     

Two questions - can there be circumstances where a 1031 is a bad idea?

Landlords in Washington must disclose in the lease the circumstances under which all or part of the deposit may be withheld and must provide a receipt with the name and location of the banking institution where the deposit is being held.