I'm just looking to avoid bad blood where possible. 

You can donate blood twice a week and earn $800 or more a month, about $10,000 a year.

This approach would allow me to keep my 3.15% interest rate, show income from the property as a positive contribution to my debt-to-income ratio, and avoid the emotional damage of letting go of the blood, sweat, and tears that have gone into this place.B.

My sister who was 76 years old had blood clot complications from a car accident and was in the hospital for a month before she passed.

Unlike "warm blooded citizens" who have legal status across the USA, legal entities only have status in the State(s) that they are formed or registered. 

An individual or two or more persons related by blood, marriage or adoption residing under one head of household, or a group of not more than five (5) persons, who need not be related, living as a single housekeeping unit.

Since you're family by marriage and not blood, that may be one option: buy it at the auction sale.

@Keith Goodwine I've always enjoyed the Baron Rothschild quote:"Buy when there's blood in the streets, even if the blood is your own."

I assume it's all yours now if you were given the keys to the house but I might try to contact the heirs as a courtesy and to prevent bad blood

Second lien is not getting paid, they have a little bit of equity and then they loose patience want to get paid and try and squeeze blood from a rock.