SS Deal or no Deal - rental prop with tennants?

[Joaquin Caballero]

I was approached today by a realtor who had a possible deal but it was way too complicated for me to give him a hard line "yes or no" and I wanted the BP community's take in it.

The homeowner owns an invesment property with tennants living in it. The tennants pay on time and are interested in buying the property from the seller, but less than what they owe as they are underwater. The rent is a little more than half of mortgage payments and the seller is about 3 mos behind with a NOD filed and trustee scheduled for Septemeber!!

I know it sounds like I should just pass......

But for education's sake, Deal or no deal?

I know insolvency has a lot to do in proving your case to the lender to sell short, so does the fact that the property is occupied by paying tennants show that the seller is NOT insolvent but just made a bad investment?