The proper way for the father to assert his interest in the property is to file a proof of claim in the bankruptcy. 

That is a small kitchen so looking at less than 10k all in, the flooring 7-8k if you are using a life-proof style LVP and drywall/paint about 5k based off your SF.

We added value by repainting interior, new floors, new roof, resurfaced the pool, added a fence for privacy, upgraded the landscaping, sealed and painted the exterior, added central A/C with new unit, upgraded the irrigation system, added gutters, added security cameras, added hurricane proof front and rear doors.

Did you need to show prior fundraising proof to the SBA before receiving their approval @Yolanda D'Oyen?

You don't know how the process works so I don't know why you think you would be getting offers accepted without a pre-approval or proof of funds.You get a pre-approval with a lender you know and every time you make an offer, you just have them adjust and confirm the date and the new property address.

We just notify them certified mail and provide MHA the request form, 3 comps and proof that the tenant was notified of the increase 60 days prior.

Consider including a Proof Of Funds letter to bolster your bid.

The loan we were applying for is an FHA, which stipulates we must provide a signed lease for our half of the duplex (to be newly rented out) but for the other half which the parents "own" (in reality all three are equally owners of the entire property.) we would need to provide proof of rental income on our tax return, however her parents claimed that so we seem to be SOL.The mortgage is covered, we can rent it out no problem, but the underwriter is saying on paper it looks like she is responsible for the whole duplex and the rent for half of it is unreportable.

This way my average becomes less than 7 days per stay.At the end of the year I assume to use the short term rental loophole I need to provide Airbnb proof that I averaged 7 days or less.

They normally just need proof (i.e. the lease) as to why a payment was made.