Sale of rental property cancelled by lender 12 hours prior to closing. What to do now?

[Oliver Trojahn]

We are selling a rental property (townhouse) for $68,500, we purchased the property with conventional financing two years ago for $38,500. We signed the sales contract over 30 days ago, the buyer was using conventional financing for the purchase. Everything was going as planned, appraisal came in at 72k, buyer was approved and the both our title company and the buyers lender scheduled the closing for today. Yesterday around 4pm the buyers lender cancelled the closing (we weren't happy). To my surprise it was thrown out due to the Fannie May rule that denies a loan if someone in the HOA condo development owns 10% or more of the properties in the area. Talk about a crazy hidden rule that i didnt even know about. just nuts.

So today, the buyer is still interested in closing in one way or another and so are we. We have a lot of plans with what we will do with the profit (we are rolling the 30k profit into two more financed rentals via 1031 exchange). In fact we already have an accepted offer on another property. The buyer has asked the lender to file a waiver on the 10% ownership rule and we will hear their decision early next week. Has anyone had any experience with the Fannie Mae waiver process and do they typically just deny those as well? I would imagine they would.

In order to not let this deal die I would love to hear some ideas from the bigger pockets world on how this guy can get financing. He is a very strong buyer. Before i decide to go a Contract for deed or Lease/Option route I would love to get some ideas on making this deal possible. I may also get him in contact with some portfolio lenders that could finance this property if it fails. If do go lease/option or contract for deed i believe he could provide 20% down on an owner finance type deal which may make it worth while.

All insight is appreciated. Thanks