I like asking the reason why they are selling - most times the story checks out but sometimes it is strange and other times they reveal something about the property that is off.   

The home will be updated with fresh paint and newly finished hardwood floors.

There is no deferred maintenance on either ( at least that I am aware of and an inspection report would reveal more).

Also, if something significant is revealed during the inspection, and you want to trade remedying that issue for a vacant first floor, that could be an option, but the issue should be material and not exaggerated, and the seller should have the option to remedy the inspection issue instead of making the trade.Lastly, and somewhat unrelated, you should always require that any security deposits, and interest accrued on such deposits, be passed on to you at closing.

Listening to the podcasts and reading some forums,  I get the feeling that it is better to just start fresh and not to inherit tenants. 

Pretend it's an open house and have the smell of freshly baked cookies mask the not-so-pleasant aromas. 

FP's refer you to someone else as our stalwart friend and freshly minted Certified Financial Planner @Scott Jensen has done three posts back.

I'm going to reveal my noobness but if you do that ....

It gives them a fresh start, and also documents any current damage/condition of the place for when they move out.

Sometimes the best medicine is new surroundings and a fresh start:).I totally understand the emotional attachment to the house since it's the home you were raised in.