They were win win deals for both parties.  

IE- you may have a hard time finding the bank to actually offer to, and when you do, depending on that bank, they may forward you to their REO broker working on their behalf.2-Assignment of the Mortgage- again, just because it says Bank of America, it could have been sold to a 3rd party, whether it be a private equity firm, small investor, or another bank, and that assignment may not yet have been recorded. 

Third when he got his income tax in to go to a local bank and buy a Certificate of Deposit.

The evaluation of the asset that is pledged can vary according to each of the parties involved.  

Lets just say I am VERY tempted to charge a $50 fee per person JUST to get interested only parties!

I'm currently in talks with a BP agent/investor who I'm hoping will be the third time charm.

There is no issue with giving a past owner an option to repurchase that I'm aware of in our area, a lease-option cam have a different flavor, so check with a local attorney.The option could be made with a third party who in turn agrees to sell back to the original owner, I think adding a buffer or strawman would clog any path back to you if you're not a party to that end transaction, you'd be letting someone to act as a wholesaler or buyer/flipper.

Options as I see them.1) do nothing and hope the smell goes away on its own or I find a tenant without an olfactory sense.2)  Replace the carpet and pad (hopefully I won't have to put Kilz on the subflooring also). 3) possibly replace the pad only.4) Get the carpet cleaned for the third time (for free).Any other suggestions? 

A "Short Sale" is 'selling' the property, a new party takes title, and the Mortgagee taking less than what is due.  

It provided a level of comfort for all parties.