You do need to "sell" all assets for your Rental Property. Otherwise, they will still be on Schedule E next year. That is the main reason for reporting the sale under Rental Properties rather than the Sale of Business Property.
If the property was available to be rented while you made repairs (even if you had listed the property for sale), you would report those costs (including mortgage interest) under Rental Expenses.
However, if the property was not available to be rented (or you had no plans to rent it again), any repair costs you incurred before you listed the property increase the basis of the property and reduce any gain on the sale.
Any repairs needed in order to close the sale may be included in Selling Expenses.
Compare the outcome of each treatment before you decide where to report the repair costs:
Sales price
Less: Adjusted Basis in Assets (net of depreciation)
Less: Selling Expenses
= Capital Gain/Loss
Rental Income
Less: Rental Expenses
= Ordinary Gain/Loss
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