At this point, I would recommend having a line of credit to cover these things so you don't have money sitting in the bank doing nothing when it could be put to work.I have 33 units, no debt except for mortgages, and excellent income.

Credit unions, banks, mortgage companies and private lenders.They all had the same answer.

They wanted $1.2M to payoff  maturing HML on a $2.5M property. their credit was 580 and we told them we would not give you a loan but we would buy the property from you for $1.2M, provide you with a 12 month lease with an option to buy. in 12 months you either buy it or its ours. 

So I get this referral from a relative about a tenant who has good credit score, no criminal history, and a good paying job.

He's a terrible person.

Also, townhomes are a great bridge property, it's a common trend that those in townhomes are aspiring for home ownership meaning credit sensitive and with that right mindset. 

What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.?

You can also send payments to credit card whenever you have spare money.

I could be misunderstanding how this deal was structured, but wouldn't the seller who is on the underlying mortgage have an incentive not to let it go into foreclosure since their credit is at stake?

So far mostly people are telling me I'm probably stuck until their lease is over. meanwhile I also need to pay down my debt and improve credit score.