Get professional statements about how you have remedied the situation and the current condition.Since you have a pending court matter, you need to make sure you are following landlord-tenant law to a T.

Seller disclosure statement mentioned previous owner had a termite problem.... now, my current project is removal of all the exterior brick with a complete rebuild of wood frame. 

If the borrower still has some utilities in his name to try and prove occupancy he could still try and get 10K for the HAFA program.The Bank is not going to ask him many personal questions, they will ask for bank statements, pay stubs and tax returns.They will only have questions if they find certain things in those documents like income that was not reported, transfers from or to unknown bank accounts, other properties owned that have not been reported in any of the applications.

@Vincent V. as Vincent said, it will be a credit to the buyer on the settlement statement.

Request tax returns, utility bills, rental agreements, bank statements etc.

@Charlie Fitzgerald, can you clarify the relationship of the loan to your statement?

That contract language must allow you to assign by statement or signature.

Initial Investment is defined as the Sales Price, NOT the Sales Price + the Cost of Improvements done to the property " So from the above statement, this seems to mean that the New " Cash Out " loan can NOT equal more than the Initial Purchase price for the property + the Closing Costs ?

You need to understand how to read a P&L, Balance Sheet and CF Statement - even if you hire an accountant if you don't understand the numbers you may struggle since your P&L could show $20,000 in profit but your bank account is empty.  

Separate bank accounts, book keeping, annual statements, splitting bills from vendors, annual minutes, and my favorite, annual tax returns.