I advised that giving any settlement would invite similar frivolous lawsuits in the future, the insurance company then gave them $20K to settle because it limited their potential liability.

That is showing some movement and depending how old the house is, some settlement is normal.

When we cross-reference the bank statements with the Excel document we found the amount on the document was greatly overstated compared to the actual bank balances.We figured a settlement was all that certain at this point because there was no denying the fact that money has been misappropriated (although her lawyer claims it was an "accident" and only "on occasion").

The other owners should not let the settlement be approved unless the buyer is willing to kick in additional money.

You should have an attorney handle your settlement.

David,Since you will be flipping the property, why not ask the seller to have him remove the tenants for you, prior to settlement?

He is worried about selling too many due to capital gains taxes, especially soon-to-be acquired C & D.I am thinking that maybe an assignment contract to us prior to settlement on C & D (Landlord acts as wholesaler) would maybe be the cleanest way to do this but as I am relatively new here just looking for advice.

This is a bit tongue in cheek, but a title policy is more accurately described as a settlement agreement in advance in which the title insurer attempts to specifically define and limit their obligations in connection with any negligence they commit in their title search.

Give the HUD-1 settlement statement to your CPA.

If you look at a standard HUD-1 settlement statement (your father-in-law will be very familiar with this), there is a standard line item for "subject to".