And if he is tying it together, sales and management, then you'll want to limit complications going forward and make certain that if you want to choose another management company after the sale, there won't be any issues.   

It is pretty customizable and can be as simple or complicated as you wish.

But if it's signed by anyone other than the party that has/had an ownership interest in the property, proper notification hasn't happened and the clock on the redemptive period doesn't start until "proper" notification happens.The more heirs, the more complicated this gets. 

If I plan on picking it up as a buy and hold rental and I can generate positive cash flow at $135, even though its over the FMV, would it make sense, given the time, headaches and complications of a short sale to pay what's owed or should I offer the $125?

To me, it seems like a complicated math question. 

@Bob Romano If the house took a month to sell, then I would fix all the items she's requesting if none are overly complicated or too involved to address.

This can complicate things.Don't underestimate the financial and time commitment to getting your license.  

It doesn't have to be complicated.

Slightly complicating matters is also selling our existing home.

Power of Attorneys for ailing old people can get extremely complicated, and the entire transfer could be voided by a strong Elder Law attorney if the old person decides to renege and uses then existing mental condition to challenge the transfer.