It looks like they have failed to make payments since April (we have been paying rent on time, auto-withdrawn from bank account).Ideally:  I'd like to have the loan/trustee waive all fees and interest, potentially lower the asking price ($10,000 discount on a $160,000 outstanding balance of a home that would likely appraise for $185,000) and we'd immediately go through the purchase process as is.Do I need to bring the Trustee into the discussion with the owner at the same time to make this deal go through?

Even in a high market like Austin, it's best to start with buying an owner occupy for equity, principal pay down, appreciation, tax benefit etc   Your property management fees sound high.  

Because it's my first deal, I think my lender is charging me high fees for settlement purposes.

Try a couple small local banks and big banks and find someone you feel comfortable with and who has the best rate (take into consideration closing costs and other fees, not just APR.)

@Donna Ryngala Any attempt to circumvent owner occupancy agreements - which you will sign at closing - could set you up for a charge of mortgage fraud.I'm not the world's foremost expert on this, but I do believe that the new home must be your primary residence, including being your mailing address.Talk with your lender to be sure you understand the requirements.

He can & would do the work, for a fee.

I couldn't find it on my amazon list and I'll have to charge my Kindle as it's on there. 

The buyer spent a lot of time and $10,000.00 attorney fee to win the case but get nothing (zero dollars) from the seller due to seller's bankruptcy.

They're smacking homeowners with high late and attorneys' fees. 

They have been late with rent a few times, but they've never missed a month.Last month they were late and I charged them a late fee.