The first factor to consider is Proposition 19, which will trigger a reassessment of property taxes if the home is transferred to either of your father-in-law’s daughters.

Although I wouldn't suggest this and you don't need to do this, most lenders have a due on sale clause and this could be triggered (altough low probability) when transferring title out of a borrowers name. 

If you're lucky enough to get a free and clear property where the seller is willing to finance, this reduces much of the risk associated with seller-finance.I would make sure the title is then moved over to your name, especially since there is not a risk of a due-on-sale clause being triggered.

How much below market value would a sale have to be for it to trigger a gift tax and if so what is the rate on that? 

However, this could trigger the due-on-sale clause if financed, so check with your lender.

Not ready to pull this trigger, but are we legally obligated to find a tenant or can we just tell them the offer has expired and that we are no longer seaking a tenant. 

Once you take an action, that can easily trigger tax consequences.

Since you claimed accelerated depreciation through cost segregation, a sale without a 1031 exchange would trigger recapture tax on the depreciation taken.

The last thing you want it to trigger income taxes from accidentally cashing out.  

After 20+ years in real estate partnerships, here's what actually puts you on the IRS radar (and what doesn't):
REAL Red Flags That Matter:
The Partner Complaint Trigger
Disgruntled partner files Form 8082K-1 dispu...