Tax law is complex and is actually a small part of the CPA exam. 

Waste of time, huge room for error and zero reason for a customer to do this.....any Contractor worth his salt will have better pricing/quality/selection on the big stuff and will have guys on his crew that can do those dreaded 'parts runs' for the little stuff. 

If so what were the circumstances and what was the reasoning?

However, I'm not 100% sure this was actually a mistake.

Part of the reason we have that equity in our homes is to tap into it and turn it into even more wealth.

(we all know the reason why) In the meantime, should I just move forward with the lease and let them know they need to provide it when it becomes available?

Quote from @Jessie Dillon: one thing that you can do is have the seller transfer the deed to a living trust that they're the sole beneficiary of, and call the bank to give them a heads up that they're doing it for estate planning purposes. then, a month or more later, buy the property sub-to, and change the beneficiary of the trust. the bank can not see who owns a trust, and if they ever come back and question it, you can just swap the beneficiaries again, show the bank that the seller is still the owner, then swap it back again when they buzz off. this is one of many reasons it's so important to keep a good relationships with the seller if you're buying this way. you have to work together on some stuff.In summary: fraud. 

If for no other reason than you can. 

They care about what they estimate it would cost to rebuild the home.All else being equal, yes, older homes are more expensive to insure than newer homes for a variety of reasons. 

I wouldn't think it would take a private lender (which is much higher priced) than a typical mortgage broker's rates.Is there a reason you think you need a private lender?