Hi Joe,
Could a third party who has some skill at negociation and moreso tact in this kind of situation sit down with your partner and her brother to try to negociate the valuation and a route map on how to move forward? It would be best scenario. If I were you I'd not take part in this directly. At times like this, familes can implode irrationally and no hostages are taken. In the meantime have you offered him 50% of the going rate for rent of houses in the area? this could help. Other than that you may end up running into professional charges / costs for valuation, possibly putting the house on the market or even legal costs for a protracted battle.