More and more bank sellers are trying to play that game - as an agent and investor, I assure you that $500 is hardly worth the time to work a deal next door to my office or my house.Why not offer to make up the difference so that he earns that standard 3%?

Standard SFR homes with a listing agent involved though is where they seem to be less common or useful at times.

As to the seller getting his property back if you don't pay, this is standard in a subject to contract.

I keep the rentals to a high standard, tenants pay rent on time every month, and I repair anything that is actually broken, but it seems that every day I'm fighting with tenants who are just waiting for something to go wrong to jump down my throat. 

Attend homeownership counseling; Receive a homeownership certificate; Ratify a sales contract within 120 days and settle within 180 days; Obtain a mortgage from a lender; Pass both a Housing Quality Standards and Private Home Inspection; and Contribute 3% toward the purchase (1% must be from personal funds).

Everyting from normal financing with 20% down (would be tough to find the 70-75k needed;  Seller is interested in Seller's financing, but I haven't done it before, and I'd need advice on what terms are acceptable/standard.

Do you required a non-refundable EM deposit even though that is not standard in the RE industry?

Those standards cannot violate either Fair Lending or Fair Housing standards and those require additional written policies and procedures. 

Is this a good deal by any standards?

Completly updated home to neighborhood standards.