They will find a first time home buyer that will be happy to pay close to what the neighbor's house (in great condition) is worth.

Simply gifting him half the property now wouldn’t immediately allow him to claim the exclusion without fulfilling this residency requirement, I don't believe.One thought would be to use a HELOC to pull just enough equity out of the current home and use it to buy a smaller home, or at least the down payment.

Do the tenants or neighbors have any surveillance cameras?

Quote from @Chris Seveney: Quote from @Jay Hinrichs: Quote from @Chris Seveney: There is no guru or course on the planet that can teach you real estate development in the span of days or weeksSomeone can teach your college level 101 stuff but I would love to see how these courses tell you how to interact with planning and zoning boards, how to negotiate proffers, how to deal with disgruntled neighbors and community members.

As an example, my neighbor added a second story to her home and the contractor gave her an estimate that she agreed to. 

Keeping my eye on the worst houses in the best neighbors that need some reno that I can turn into STRs or LTRs.

If not, you will have a steep burden to prove you were able to actually fulfill your end of the contract and have a court order the completion of a sale. 

The requirement seem so loose and so could I technically just have like 1 panel to fulfill that requirement?

Accept it "as is" and fulfill the lease.By responding quickly, professionally, and confidently, they realize I am not an easy target and choose to move on.

and in my experience they'd rather leave a property vacant than sell for less than what their neighbor got.