I don't think being all in on each unit for $130k is a bad scenario if you can separate the units and sell them separately, or even get them all repaired and cash-flowing and then hold it or sell it off as a turnkey property to someone else. 

Is it typical that the buyer and seller have their separate attorneys ?

In most cases, if the units are separately metered, the tenants can and typically do pay for all their own utilities.

I'm considering purchasing two older single family homes that have separate addresses but are on the same lot and same tax and water bill.

What about separate metering?

Your clients will have a separate auto policy and if you only write the home there's a real good chance you will lose the account within the next 5 years as they will want to bundle the two together to receive discounts.   

You're purchase and sale are on two different calendar and two different tax years (satisfying at least two tax court rulings) and separating them on two consecutive tax returns.3.

Are they on their own separate parcel?

Rent out the House part and the mother-in-law suite separately (could also be a short term rental). 3.

Can you survey the property and have the property split up to basically make two separate properties and insure the good house?