Would you have net income or net loss without the cost seg study?

The REI world is full of advisors who have their own pet solutions for problems and they tend to develop tunnel vision around them. 

The buyers will do just fine, it's just an agent's lamenting the loss of a "easy score". 

Once you recognize a capital gain, there are ways to invest that create passive losses to offset these passive gains, but that can only happen if you have capital gains in the first place! 

I see Seabrook as a place to visit when you want and use the losses to offset high income net worth stuff.

Do I cut my losses and agree to work with their partner?

I don't care how much a property appreciates, it can never catch up to those "exponential" losses. 

The point is if you get sued, you want to isolate your exposure for loss.

Should we be giving a little more grace to the folks who have handed it in and admitted defeat, simply because they will not compound losses on those deals?

If you find a good manager, you can still make as much money (or more) because they will attract better tenants at higher prices, reduce turnover, maintain the property better, reduce losses from amateurish mistakes, etc.3.