We have a couple options as I see it (using an assumption that the market value is say $800k for the purposes of this discussion): Dad takes out a loan to "purchase" the house from the estate and arranges to give my aunt $400k.

We take this opportunity to talk about parking and public transportation options related to the property they are viewing.We ask the applicant to call us when they are finished with the application.We arrange to pick up the application in person at the applicant's current residence, if we can.

Some hard money lenders will fund trustee auction properties, need to have it all arranged with them before you bid on a property.  

Find the best licensed electrician, master plumber, HVAC and roofer in your area and arrange for them to inspect. 

@Joe Splitrock thanks for the response, there is some concern from both my wife and I about living that close to my parents but we are both on board for living next to my parents as long as it's a short term arrangement. 

Etc.I wouldn't take a project to a board until I've done the following:- Run thorough numbers (conservative, average, aggressive)- Gotten some level of comfort on the environmentals - Obtained control either through purchase agreement or option- Obtained renderings and floorplans- Have at least budgetary construction figures- Financing preliminarily arranged- Secured counsel- Determined target market - Ensured any gaps in my development team are rounded out by a    partner, vendor or consultantAt the end of the day most cities are looking for us to lead this process, but if they are truly pro-development they will have the ability to help developers remove obstacles to projects. 

Are you offering to pay a higher interest rate for this type of arrangement, Are you coming in with a substantial amount of down payment?

There are many possibilities and arrangements that could be done whether through partnership llcs, joint venture agreements or simply a promissory note with deed of trust.Alternatively, you could arrange such a deal yourself and learn along the way but I would caution working with friends/family money until you feel confident in the investing principles, know your weaknesses(outsource these) and strengths and have a plan of action.

The homeowner had tried to workout an arrangement with the bank but fell behind on that agreement.

I arrange tours of the property and talk to tenants about their move in requirements and ability to pay upfront costs.We offer applicants that are interested in moving forward after the showing the option of taking the honestrenter.com quiz or authorizing the transunion smartmove credit/background report.