If the 2nd is compeltely upside down and someone wants to complete a sale then it's in their financial interest to try to recoup any funds that they can.Depending on 1st lien investor or insurer guidelines will determine how much money is allotted to suboridnate lien holders.

Maybe you can get an equity loan on your house or you might apply for a FHA insured loan that helps you get started. 

Has a list of people waiting to rent there and is getting $675 per unit. 2 years ago one of the tenants left the gas stove on with food cooking and it burned down the 3rd unit, due to insurance reasons he had to remove the building pad as well after demo.

Is it even legal for an insurance agency to ask if you rent to section 8 tenants?

I know that you can't usually sell such a property within the 120 days because you can't get title insurance. 

The brokers says she does not want to release Funds to seller before work has been made and paid for by the insurance.

Does anyone know of any insurance brokers or PMs that specialize in MFH in the Phoenix, AZ area?

I loves in a few during my undergrad years, it was nothing to have 250+ people in a half double 2 or 3 times per week for a little party, that’s just the norm in Stroudsburg.Parents sign the lease, renters insurance required, monthly checking, 1st, last and security.

well your description of the situation is not complete.. do you know its landlocked.. somehow if there is a home there I suspect it is not.. but it does happen I am in a landlocked case right now been two years fighting it thankfully I have title insurance and they are paying the lawyers.. first thing you do is not rely on your own due diligence if your not a surveyor or familiar with maps etc.you do one thing first .. you order a title report.. you may have to pay for it.. say 200 to 250.. your probably in a title abstract state. ( not sure but most of the NE is)  the title company hires an abstractor to do the court house work they will then write you a title commitment.. if your TRULY landlocked there will be an exception IE they wont insure access.. if this is missing then you ask them to clearly denote on the plat map where the legal access is.. you then take that map and see if it works on the ground.. 

Like I am avoiding condo prop for big mgmt fees and costly insurance.