Things went to crap through covid and the borrower stopped paying. 

I am responding as a consumer not a STR owner we had one its lasted for us for exactly one tenant then we felt it was too much work for the return  on investment we do much better loaning money and buidling new homes than to worry about people goofing up our homes :)I do have some MTR you know fully furnished homes in Vegas and those are money makers for us top of the line tneants paying double the going rate for rent.

Our tenants pay $2,700 in rent and the mortgage+fees comes out to $2,360.

Going to guess the $797 is rent only, with tenant paying utilities.

Reporting the proceeds you pay to seller on a 1099 sounds reasonable.

Some PMC's will charge a lower percentage fee, but will charge it whether tenant paying or not.

That will increase your material costs for the job and is the contractor paying for the material in their bid or are you paying for it and paying them a labor cost.

Quote from @Jeffrey Duck: I see no reason to pay an attorney for this, but it's your dime.The current lease was between you and Person B.

Is it worth to pay that much for 1:1 coaching for 6 months and a laid-out course? 

Fix the problem and make them pay for it.