Getting partial release from HUD for infill lot purchase

[Alex Rollins]

I recently had a infill lot under contract to purchase so I can build a 2 family house. After months of seller trying to get a clear title, seller was not able to get the partial release from HUD unless all the proceeds went to the mortgage balance. Because of this seller decided to back out. Is there still a way to make this deal work?

One possible idea I had was working a new deal with seller for 50% less than the original deal on the recorded paper and separately give seller cash once I build and sell new home. 

I welcome all ideas and feedback. Thanks.