Your state and local law may have some mandates that you must follow regarding treatment of those funds.

While we were working on the first unit, my husband was diagnosed with cancer and we put the project on hold for his treatment.

This has kept our treatment consistent and personal.

-Has no crawlspace (common for older properties) so we couldn't see the foundation-Drywood termite/wood decaying fungi damage seen on all the windows/doors/parts of the beam on the exterior, parts of roof decking and rafters in the attic-Old leaks/moisture damage seen in the ceilings and attic-Parts of the roof has patch work-Roof doesn't have any permits on record (don't know how old it is)Seller's offer to me:-Fumigation treatment for drywood termites (tenting the house)-Replace and repair all damage wood throughout the house-Replace the entire roof with a new permit-Replace one window in every room (not all)-Pay for a structural engineer to inspect the foundation-Offer to get quotes for repairs and have a 15-20K budget to make all repairs, house is 500K.

What would you suggest is the best course of treatment?

Just a quick note @Caroline Gerardo that raw land can qualify for 1031 treatment. 

Also don't forget to look into your tax treatment for signage.

It doesn't matter whether you qualify for Section 121 treatment on the other half, which I hope that you do.

The whites just get destroyed faster even with bleach and hydrogen peroxide treatments. 

The fact that you held it for longer than one year does NOT determine the tax treatment.