If there are several judgements and liens against the property, you may have to foreclose or spend more money settling out all of those items even with a helpful borrower.

Since then, he's got 3 rent judgements and paid just in the knick of time to stop eviction.

Never been sued, never had to sue anyone, never had to use my very friggen expensive E&O policy before (thank you up there) so not sure if you'd need to file suit first to gain a judgement before pursuing E&O.

My tenant can go see a property and I trust his judgement in judging the property condition and the location value (I don't live in SC). 

So not just you were sued, you were sued, lost, got a judgement more than the value of your insurance policy, and more than the equity in the property. 

Comps to see what the property is worth, research mortgages to figure out how much debt and equity they have, check title to make sure there aren't any liens are judgements they forgot to tell you about.

However legal Judgements you settle on must be sent through the court it was assigned and the judge will sign off on the Satisfaction Judgment that can take some time aside from that I would have to say I did a splendid job!  

At the end of the Final Judgement there is a notice in bold and underlined print that says "If the property is sold at public auction there may be additional money from the sale after payment of persons who are entitled to be paid from the sale proceeds pursuant to this final judgement"A third party bidder was awarded the auction but doesn't the mortgage holder have first rights to this property?

Not something I would do for any tenant as some people have horrible judgement in roommates. 

This is ultimately the person that will render judgement.