Problem with Timing Belt?....

Im buying this 95 dodge neon for 500 bucks, and my friend said that all thats wrong with it is the timing Belt. Well i inspected the timing belt (her dad had taking the housing off the belt) and the teeth are shredded. But her dad says that the valves arent bent and it has plenty of clearence between the valves and piston heads. He told me the Tensioner for the timing belt had siezed which stripped the belt. I was wondering how often this occurs, and would just replacing the tensioner and belt solve all the problems (as long as the head isnt f*cked).
thanks in advance

oh yeah, and is it ever heard of that when the belt slips or breaks (or shreds) that the engine is perfectly fine (except for that belt)

It sometimes happens that there is no valve/piston contact, but I wouldn't bet on it. I wonder how that guy knows the valves are fine without pulling the head, did he run a compression test or something?

Still, for $500 or less you can get a new engine. $1000 total still isn't bad for a used car...