Also in regards to continuously putting down 15% - 20%, at the time I was purchasing the property was before I had discovered the BP podcast and was not aware of all of the more creative ways to purchase properties and my only other known alternative at the time was to use an FHA loan on which the mortgage insurance would have diminished the return so much that it wasn't feasible. 

Would any realtor/investor in the Austin area be willing to give me a second opinion if there is a way to make this scenario a win for both my clients and me?

I spent enough time in the corporate world to know that when you involve attorneys, the attorneys are the only ones who win.

It sounds like a lose-win situation.  

Of those that we do accept, we will win some and lose others when we bid (as other smart investors also have access to off-market deals).  

You may or may not win this, be gentle but firm with your position when explaining it.The tenant that occupies the basement could be twisted a couple of ways.  

NJ is probably at least $200K all-in in better areas from what I have seen and even that can be tough to find.Brooklyn is a non-starter without cash or partners who have it as entry prices are high and even the low-income areas have been discovered.

If I win, we record a security deed and proceed as normal.  

Win-win, right?!

The best thing is to just actively get involved and learn from the mistakes and winning techniques of other investors.