If you can charge more rent: then calculate the the NPV using the cost of the dishwasher as N = 0 and your yearly cashflows will be the extra rent you charge (for ex. $25/month or $300/year). 

We're talking about REOs and I've never seen an REO contract that doesn't say that the buyer has a right to terminate if the seller can't provide clear title.Of course, as Ned points out, if there is an REO addendum out there that requires buyers to buy without clear title, that's clearly an abuse and I'd be the first to start boycotting that bank.

As @Ned Carey points out, it's a numbers game. 

As Ned mentioned this is usually given to a bank.

As  @Ned Carey so eloquently stated, your grandparents are not helping the tenant, they're enabling the tenant. 

To do that figure the payment on a FI calculator and enter that as your payment, take the loan amount and subtract all costs in getting the loan and enter that as the PV, enter the loan term as N and then solve for I the interest.

The two apartment REITs I got a chance to analyze yesterday are AlavonBay Communities (AYB) and its competitor Archstone-Smith Trust (ASN).

Also, as Ned stated, creative financing is not forbidden.

You should consider attending the meetup on the 11th as Ned suggested.

Thomas, Steve is correct, do not accept a deed in lieu if there are sizable junior liens as Ned pointed out.