You used the term "Co-Signer" which is normally not an owner, but an additional guarantor of a debt.

Is this the correct term or was she actually a "Co-Owner and Co-Borrower".

This might be a case where the difference in the above terms matter.

(EDITORIAL COMMENT) Realtor's (And many other professions) should not give tax advice. If you accept tax advice from one, make sure to get it in writing, so their liability insurance will pay when the advice turns out to be incorrect. Especially when they are giving the advice in a manner to entice you to enter a transaction.

No they are divorced.  Her name is not on his house papers anymore.

Hopefully the realtor checked with his barber before he gave that advice 😬

Sorry, it's Co-Owner. 

"Her name is not on his house papers anymore."

So this isn't the first home she bought?

I think you just answered your own Question - She was a prior owner?