I think I have a solid plan to recover the value of the property from a construction standpoint, but financially I'm not so sure.

@Ryan E. what you are suggesting about waiting till it appreciates to $800k is the kind of logic that contributed to a lot of people’s losses in the last RE crash and, for that matter, many losing gamblers.

Put your grandfather's 1970s strategies aside during this time unique time in history where we're likely going to see a good, steady increase in values over the next 7 to 10 yrs, which can dwarf monthly deficiencies.PLUS, those deficiencies accumulate in what's called a PALA (Passive Activity Loss Account) which can be written off for years and even after the home is sold correct?

Some flat-fee brokers use the entry-only listings as loss-leaders to capture more lucrative full-service listings when the sellers, who thought they could do it themselves, give up. 

Sounds like you need to get in touch with the loss mitigation department at the current owners mortgage department and get a sales agreement in place pretty quickly to post pone the sheriffs sale.

.- Every door is another leg to stand on and can withstand some vacancy or my loss of work, should that happen.

I made a loss on all three deals because of rookie mistakes.

I would still list it on the suit if you end up filing but if she uses that defense it may get thrown out and you will just have to claim it as a loss. 

@Sarah Lawrence , even if you were in the startup phase, meaning you haven't acquired any property before, the fees such as wirefees to acquire a specific property have to be capitalized and later treat as a loss if deals fall through. 

This is my first insurance loss on a house.