Understood real estate, got not escrow/title for a builder in Texas/California.

The tenants understood they were the ones who benefited from the extended lease and agreed to the rent increase.Option fees are negotiable.

I understood that they need these services, but I wasn't sure how to approach it.

Jim, no offense, but I understood your question pretty darn well.  

This last catch is the remaining problem.I never really understood the meaning of "exemption".

Homepath offer low rates and no PMI.  203k is probably the best understood by conventional banks but beware the PMI payments.  

Our RGE gas/electric is $209 a month, water/refuse is about $60 a month and our mortgage/escrow with insurance and taxes is $870 a month.If I've understood some of the rental formulas correctly I should be looking at mortgage/escrow x2 = total monthly rent if utilities are paid by the tenants?

The deal doesn't seem bad to me as long as it is fully understood from both sides. 

Once their broker understood that this would tie the property sale up for years, he finally convinced the brothers to perform and complete the sale. 

If I understood correctly, you bought at auction and had the occupants out within a week because you got the "Writ of Possession” after the ten day wait period without going through the eviction?