@Minka Sha I think you should follow @Elizabeth Colegrove with her advice about tightening the offer by offering lower cash but compensating them with the high likelihood of closing. 

I would be compensated by the 25% referral fee off of the Realtor's 3%.

In order to compensate time/footwork spent showing properties it makes sense to provide a commission.  

It is acceptable for a seller financed transaction to sell slightly higher as in relation to what conventional financing may have cost a buyer, a seller may not charge loan fees or points with a loan funded by equity and the price is the only adjustment a seller has available to compensate for granting the loan.

This will probably meant that rental increases should compensate for any significant interest rate increases.

Now, I was at a credit union with a loan officer (with someone else) and that guy didn't even know what compensating factors were or how to figure debt to income!

The easiest and cheapest way out may simply be to get with Jose, who if he didn't know then, now knows the truth of the situation regarding his dwelling and while his status is what it is, he still owes some money to someone and that person deserves to be rightfully compensated. 

So don't be afraid to compensate yourself for it.  

I offered to change the rent due date to compensate...and to try to put an end to late payments.

There could be some anomalies, for instance if one of you was more involved in active management, that person may be entitled to some additional compensation.