I do not believe I am at fault and the bathroom mold is a red herring.Looking for some advice here.

Here's the question: Is it a red flag if you find a city that has many multi-family listings that seem profitable, but has A LOT of listings city wide?

Here's why: Big red flag is that he wants a contract before he is willing to show a potential buyer the financials of the property.

When it is a primary residence you can have more red tape.

Fly out there with a red and green highlighter.

In today's lesson we learn that cheap is not always cheap....But on serious note if everyone comes in say 15k and this guy comes in with half that and same scope of work....red flag.Let's be real, everyone only working to make money some how...

Are there some red flags which I need to ask or check for in evaluating the application?

Pat, that would be a red flag for a note investor.. although you could try it and list it on FCI exchange for instance and see what happens.

Now if there are other red flags, then maybe not. 

I did some research on the 203k and so far it seems like more red tape to maneuver through, however I haven't ruled it out as an option.