It was really surprising how little attention they paid, especially when we had clear evidence of neglect with videos and photos.

There is no MLS so, generally speaking, you cannot know whether it's below market and determine the ARV and evidence it to a potential buyer.

Not illegal, but evidently difficult to comply with the legal provisions required. 

Unsuccessful Property Search: Hours spent on unsuccessful property searches, where no purchase is made, do not qualify.On-Call Periods: Instances where you are on-call but do not actively perform work do not count towards material participation.Meeting Requirements:Maintain Detailed Records: Keep accurate time logs and records documenting your involvement in material participation activities, supported by evidence such as emails and calendar appointments.Seek Professional Guidance: Collaborate with a qualified tax professional to ensure compliance with IRS regulations and to optimize your material participation strategy.I hope this high-level overview gives you insight into what activities matter and ones that do not.

However there is filed evidence that the CMX-1 property in question was approved for two residential units and a commercial. 

Since you have very little evidence of what the condition of the unit was before they moved in, it’s difficult to assess tenant “damages”.

So basically, it looks like these are condos they couldn't sell and now they bring and repackage them as a supposedly killer deal to unsuspecting buyers, suggesting to you they're given a chance to buy before anybody else.Obviously it's your best right to deal with them in spite of the evidence but is it wise to promote them?

If you find discrepancies, provide evidence to support corrections.Document Improvements and Depreciation: Highlight any improvements you've made to the property since the last assessment.

If your parents didn't have any ownership rights on the property, which sounds like it's the case, then they'd theoretically be entitled to the full loan amount + market interest depending on how you guys drew everything up/what evidence there is.

We found the evidence in the trash.