What was your winning bid?

I don't see how you win the argument and you're liable to piss off what otherwise is a "good tenant".

They eventually came around and we negotiated no prepayment penalty for the borrower so that was a win.

The answer to those two unknown and unknowable questions is what will determine if selling is a good idea, but under most long term scenarios where you are in a strong market and sound financial position with your property, holding has tended to win the day over selling. 

However, if your house hack reduced your housing costs from $1,200 to $600 per month, would that not be a win?

Before I discovered BiggerPockets I was interested in buying rentals units but I did not have the money and experience so I partner with a really close friend......I know....

If you think you will go FHA, Conventional, 203k, etc. and then Quit Claim the property, to a LLC, or a Land Trust you run the risk of the lender discovering a Title Transfer occurred and activating the "Acceleration Clause" or "Due on Sale Clause" that requires the loan to be paid in full, within 'x' number of days.

I wanted to share a small tip that I just discovered after something very “interesting” happened when listing one of the units in my building that I owner occupy!

Persist and you will win.  

Effective, you've taken a non-assumable loan and unofficially assumed it.This is risky for all parties and the Due on Sale would ensue when it is discovered.