I suppose you could help them out of the goodness of your heart but, you couldn't do it for compensation unless you were registered/licensed in many states (California is one of those states) and doing it without that paperwork could subject you to civil and criminal penalties if you ended up taking title to that property, or received compensation in exchange for helping them or made some promise like, you are there to help them.Maybe I'm misunderstanding your post but, if you don't understand what the general qualifications are for a loan mod, I'm confident you shouldn't be doing what you say you are doing, or trying to do.

If I'm misunderstanding anything, I'd really appreciate clarification.My wife on the other hand,has a whole life policy because she pretty much bought into what her insurance agent was telling her...which is perfectly fine. 

If the PM told you over the phone the lease extension for the property in question got signed, and you have no doubt that was the case and not a misunderstanding with the other properties I understand she's managing for you, she outright lied to you and you need to fire her right away.

Rather than trying to nit pick his way through the facts to try to determine which side was "right, " the judge  simply ordered the deposit be returned,  along with offering some free advice along the lines of "next time you do such an offer/agreement, do a better job of tying up any loose ends to prevent misunderstandings that end up in court."

Am I misunderstanding how it works altogether?

I definitely had some misconceptions and misunderstandings.

Perhaps I am misunderstanding the vacancy expense section. 

My regrets for the misunderstanding. 

That you misunderstand what is really important and you buy at the wrong price.

Perhaps I misunderstand the situation, but was there not a reset of the  basis when your father passed?