However, I am of the opinion that I would give my tenants a heads up or the chance to fix the issue before hand. 

It felt like I had to ask Connie to take the next step of closing, over and over, as if I had to hold her hand through the process.

its hair on fire... prep a deed  get it signed and notarized have my secretary run it to the recorders.. hire a courier service to hand deliver cashiers check .. talk to customer service and get a date down so we basically knew our title position.. all done in a matter of a few hours.. 

Most recently, I have been in the resale residential market in Houston for 7 years, and I have a small brokerage I operate with a handful of agents.

She already has employment lined up but I on the other hand do not. 

At death, possession transfers back to the grantee (the buyer, in this case.) 

Does it say anything about how realty transfer taxes get handled in the event of an assignment?

Your only option is a short sale, which the bank is not going to hand you on a silver platter.

On the other hand, if I were to go through all the legal steps and fill out the required paperwork to make this first home a "rental property" and myself the landlord renting to my two friends, wouldn't this would give me more of an advantage when going to obtain a loan for the next rental property as my monthly expenses would show as less and monthly income as more?

Just have him deed the property to you, no money changes hands, you start making the mortgage payments and get the house listed for sale.