They have something going on in their lives that is motivating them to unload the property as fast and with as little stress as possible.I'll give you an example of a seller I worked with that you can share with your wife to help her understand the kind of situations we regularly come across.This guy had his house up for sale by owner because no agent could help him.

Like, should I lower the ARV by e.g. 10% as compared to a new house?

I would hope that with non-rent controlled properties, the fee you paid would have been lower. 

My transaction costs are lower because my spouse is a realtor, so I’ll only pay 3% on the sale.

I feel like the more doors the lower the risk.

It would take a long time at $500/month to make up for the $200,000 in equity that you could re-invest into a lower cost of living area.

The basis of that money goes up 10% then an additional 5%, thereby lowering your tax liability, but as far as gains made in the OZ fund, that has to come from money subject to capital gains taxes.

Im not a seasoned expert, but not new either - my take is that you should lay out more info of what you are planning to do with the property and exactly how much lower it is than the surrounding area. 

Suggest a FHA lower down payment larger MF in a more active town with high paid jobs....

The upper unit (2nd and 3rd floor) is approx 1500sqft and the lower unit (ground floor) is approx. 1000sqft.