Is this considered acceptable or does it make it too awkward for everyone?   

What was an awkward space is now a functional bedroom. 

And please consult an attorney before doing anything like that - I am not one and that would be inserting something into the title so it's an irrevocable act and you should fully understand the consequences of it before doing so.Similarly people sometimes get a notarized memorandum of agreement in addition to the P&S, that they record after they get something under contract, but getting that notarized is a bit more awkward than just signing a P&S at the kitchen table.

I felt like getting all legal would make things awkward between us.

It’s kind of awkward.

If you can speak "bluntly" about awkward topics, and then make sure you both have the same understanding of the problem, many times people will come up with their own resolution and you can "fix" little problems before they become big problems.

It IS harder and a little more awkward when you are married, but it can be well worth the inconvenience.

You could make some concessions like the other suggestions in the thread if you're concerned it will still be vacant a month from now.Something else to consider - I have rarely had tenants start off awkward and unreasonable but later turn out to be great residents. 

It should be pretty minor stuff.While I understand why the situation is awkward and uncomfortable, those are not legal grounds to vacate. 

I am absolutely terrified of talking to potential sellers because I feel that I'm super awkward.