They do indeed own 1/2 or 2/3 of the home, depending on how it is worded. And they will own the home on her death, with you having no claim to the home what so ever.
Plus the wife is the only one obligated to pay.
They will also have to sign either the house back, or have to sign on a new loan making them liable for the loan.
Indeed she was "tricked" it may sound like, but she also knew she was giving ownership of her home away.
She may sue, but personally I don't see good odds in winning.
And yes they are right in asking for a buy out, perhaps they would accept a lesser amount