What it was once appraised for and what is worth now are probably totally different numbers. Find out what it is worth now. In Florida the prices went sky high and are now dipping back down. She might have bought it before the boom and maybe its worth $400k now. Or maybe she bought it at the height of the boom and its worth $220k now. You need to find out exactly what it’s worth. You can ask a realtor for a CMA to see what its worth. If you don’t plan to buy through them you should definitely compensate them for their time.
Well seeing that she owes $260k the only option here is a shortsale. Poke around in this subforum and look at some of the shortsale topics, should help you with the basics. I don’t know much about them so I’ll let someone else help you with the details.