I personally would do the first option. 

If you can definitively prove that the seller intended to deceive you about the square footage for their personal gain, you may be able to take legal action, but probably low chance of success considering you had ample opportunity to measure the home or get an appraisal with measurements prior to closing, and had your chance to negotiate the price based on square footage and all other factors prior to closing. 

This is better than relying on insurance because it protects your personal assets from liability.

I’m not sure what more screening a person can do that the app don’t.Does a property manager go to court for landlord?

So one person attending is discounted and the other person is half. 

I keep seeing Lima One Capital pop up in regards to offering decent DSCR, but I have not personally used them.

Quote from @Gary Monroe: Personally, I think going for the SF home might be the better bet in the long run.

Before closing, we were informed by the city that the person that had the house under contract before us (deal fell through) used a lawyer to have the lots split and the addresses updated/ changed.

In other words, the wrong person's name was called off at the auction.  

If you need control over your investment in person, you are limited because of your location but will do fine.