You can get seller paid closing costs as a credit towards your title expenses, etc. 

As title says, I'm in the beginning phases of gearing up for starting a 700 sqft 2nd floor garage space into an ADU.

Here is another article...https://www.jsonline.com/story/news/investigations/2017/03/03/no-title-no-worry-llc-no-longer-owns-house-files-evict-milwaukee-family/98550996/

Or should I hold title until the buyer obtains bank loan and pays me off to transfer title. 

You can partner with her, where you both go on title and both personally guarantee the mortgage. 

If the builder never transferred title, they might try to argue that its comparable to selling a model home within a new construction developement (new home, but has had thousands of folks walking in and out for months...sometimes years).I would be confused as to why someone would offer it as new construction when it had been lived in unless their aim is to avoid capital gains, but you say lived in a few months and not two years so that does not track.

Would definitely want a strong private agreement but all parties could remain on title with allocations.

I'll spare the details and just say that RLS titled my anonymous trust with my full legal name and my wife's full legal name.

Would prefer to use our own Title Company.

Like only wired to and from a title company/escrow agent etc.