Basically, in 1996 a married couple out of “love and affection” for the grantee, gifted the property to her “reserving unto themselves a LIFE ESTATE in the herein real estate”.

I don't think there is any problem with retaining a life estate, but I would have a tax practitioner that specializes in Estate & Gift issues assist in making the relevant calculations and drafting the supporting documentation.

If I understand your post correctly, you will only have to pay for the fix up, not for the house itself (gift from father-in-law)?  

@Andrew Pettit They can give you a gift you up to $15,000 per year.

Would you recommend cards or gifts to stay relevant besides just phone calls?

Heck even give them a $10gift card (remember they're tax deductible gifts to clients!)

During the process my lender told me that you can not use gifted funds to buy an investment property.

Same premise, but you gift your parents the down payment of 50% and she isn't responsible for anything but the taxes and insurance.  

Right before the summer recess, something magical happened and it was decided the foreclosure language had to pass right now.Never one to look a gift horse in the mouth, I was delighted with the decision and the urgency.

Home Depot takes my Lowes 10 percent off coupons and I purchase reduced gift cards for both of these stores.Gail