Get a CMA (comparative market analysis) from a local agent. They tend to have more up to date information than any of the real estate websites.
Rather than rebuild the cabinets, you could change the door fronts, or just repaint/restain them. I agree with paint and tile as cheap ways to go--I used the cheap chinese 10" tile saw for $200 and have done over 5000 sq. ft of tile. You could sell it for a quick $100 afterwords, and save yourself $2-6 per square foot--and you could do tile or travertine backsplashes. There are a lot of construction leftovers out there also, so shop around, but I bought 12x12 precision slate for $1 each for the last 120 sq. ft. from a contractor leaving CA. instead of $6 each at Home Depot. A lot also depends on the age of your home and the style it's in and how well you want the kitchen to flow into the rest of the house. If you're going for a professional chef look, there is a ton of used equipment from restaurants going out of business--and stainless back splashes would be within your range if you merely painted the walls and refinished the cabinets.
$60K isn't necessarily a lot of work in Rialto. What is the purpose of the purchase? Fix and flip, fix and keep? I know a lot of contractors from my time as a building inspector, so feel free to answer here or email me.
I've run into a number of situations where the banks that own properties do not want to become involved in escrows with down payment assistance programs as they tend to take longer, and depending on the time of year, sometimes the money for the programs dries up. This is going to be true as the various counties and municipalities have financial problems. This was especially true at the end of the year.
How many estimates have you had?
Another option, not addressed, pipe sizing for both supply and drainage. A shower is 2 less units than a bath, so might save you money in the long run. If you add the kitchenette, and bath, you might need to upgrade your water meter and/or supply piping to keep up your water pressure. Check with your local building department--many contractors will tell you it doesn't need to be done unless the inspector tells you to, which could lead to problems later...or just unsatisfactory showers.
If the baths share a wall, it is probably a plumbing wall, and you'll have a bunch of pipes in there that will need to be moved. I would be that there is a cleanout on the exterior wall. It would probably be comparable in price to have the exterior wall knocked out a few feet and make your master bath a true master bath suite--unless you're already on your property line setbacks. If you call a local contractor who has been around a while and knows the local building codes, he can probably give you a number of options. In my opinion, the cost of moving plumbing to make a Jack and Jill Bath is not as well spent as enlarging the master bath.
From a construction viewpoint, or replacement cost view. In the Victor Valley, barebones house costs around $60 per square ft. to construct, not including land. This is a good starting point on which to base your decision. If you can get into a newer house at that price, you're doing well, and the sooner you start paying on it the sooner you'll start building equity. For an older house, you would need to calculate the cost to make upgrades to bring it into newer code compliance--especially energy codes, as this can make a huge difference in your utility bills.
Another issue is "how long are you planning on staying?" Most Californians stay 5-7 years. If that is likely to be your scenario, take equity, because there are many ways to make your new house, the home that you love. If you are buying your retirement home, then assume you're going to pay it off and stay there until the day you die, then buy the home you love, and hope that your heirs love it as much as you didi.
In addition to Mr. Bretzke's advice, you should also get references from previous clients. There are a number of good contractors in the area, but there are also a number that will not be up your expectations and will make the experience a miserable one. With today's low prices, and the general level of activity of your family, I would say buy a house with the 3 baths already in place, but I still recommend hiring a home inspection service as even some of the newer homes may have problems, and buy a home warrantee.