There's probably is a exclusion from coverage in the policy that excludes a loss caused by the insureds entering into a settlement agreement without the written approval of the insurer.

Payments that you make normally fall into one of 3 buckets100% of the payment can be factored in somewhere on the returnPartial payment can be factored somewhere on the return0% of the payment can be factored in somewhere on the returnHouse-hacking also has considerable tax implications in the event that you want to sell this property.You can potentially defer a portion or all of the gain on the investment property with 1031 exclusion.You can potentially exclude a portion or all of the gain on the personal residence with section 121 exclusion

Important to know these two are not mutually exclusive and they often work best together. 

I was licensed in Mass, where we used attorneys exclusively and in Maine where we used title companies almost exclusively.  

Try to value a deal exclusive of other factors. 

Hopefully you haven't signed an Exclusive Right to Buy with them already...A great place to start is to click on the "Find an Agent" at the top of the Bigger Pockets page.

So, you MIGHT be looking at something like $650k of taxable income from the sale after costs of sale, the $500k exclusion, and factoring in a purchase price of $1.2MM. 

I live in CT and invest exclusively in CT. 

In exchange, give them exclusive listing rights when you sell the property.Hope this helps!

Annual Gift tax exclusion is16k in one year so you will go over that, which means you will have file this gift as part of lifetime exclusion.