What happens if mother has an interest only loan on a building, she passes, and a real estate person gave value of the property same as the loan?

There is no estate to worry about. If the building is not worth more than the mortgage and the only assets in your mom's name are her possessions, hen call the bank and tll them the estate will not be opened and they can foreclose. Stop worrying about the tenant, unless you want to hire an attorney and spend probably over $2000 to try and collect the $3600 that is owed. Walk away.

As the only heir, the son can open a probate estate and be appointed the representative. As the representative he can sell and deal with the assets of the estate, including collecting rent and selling the building and personal property. Only the estate representative can use the court system to help in the collection of delinquent rent. The assets in the estate must be used to pay the administrative expenses (including the cost of opening the probate estate and the reasonable expenses for services attendant to handling the probate estate, funeral expenses, etc.) and then the other creditors. If the secured indebtedness on the real property owned by the estate exceeds the value of the security then the real property will not be a net value that can be used to pay such expenses. The probate is required to deal with the property and perhaps conduct a short sale. The lender may agree to allow some proceeds from the short sale to pay estate expenses because they need the estate to help them efficiently take over the property. Since there are no other significant assets the lender is likely to cooperate as the potential deficiency judgment has no value without anyone to pursue.