Getting back to my first question, who owned the house?  Just John Smith?  Or John and Mary Smith, but not as joint tenants, so the estate owned half and Mary owned the other half?  Was Mary the administrator of the estate, so she signed the deed and the closing statement shows she was selling both the estate's half and her own half?  

In any case, as @IRonMaN suggests the appraisal doesn't seem reliable.  Why the sudden increase in value?  And then you mention the "adjacent lot."  How many acres are we talking about here?  Does the entire property qualify as a primary residence, if Mary owned and lived in the house located on a part of it?