And their advertising stating no transaction fees is a lie. 

Without seeing the place my gut says its the pool leaking and the neighbor doesn't really know or is lying to you as her place is up hill from you. 

There is far too much money in that ground to leave it lie.

Too many times we run into contractors screwing people over, making up excuses, general lack of interest in the projects, lying, etc. etc.

Behind the white cottage shed lies a two car detached garage that has been converted into a studio with small kitchen and bath. 

Also don't believe the LIE that you are THROWING YOUR MONEY AWAY on rent.

The typical letters that I write usually say something to the effect of “the buyer is having trouble obtaining financing because the previous lender lied about what they could do; but the buyer now has secured the proper financing”.

Seems strange to me.But as I plan on being a landlord in the very near future, I don't want to disrupt my landlord Karma :)But I don't want to just lie down and take this if they are just harassing me for more money.

I figure there are three options:(1) get an agreement from him, get it inspected, buy it for cash - that would be ultra-fast and get him out of trouble - only of course I don't have $180K lying around(2) help him get paid up for all his debts in exchange for him selling the house to me, and then I get traditional financing - what are the exact steps here, though?

The only penalities come in is if you lie, buy it during the only OO period and say it's OO, and turn around and don't live in the sucker.