It was also a surprise because this was a "as-is" property and when we got in we saw there was extensive flooding damage in the basement.  

We were under contract on a property pretty quickly but after numerous extensions the deal fell apart. 

Idea would be to restructure terms and give a 2 year extension of I/O payments for the borrower in hopes he could secure financing.

However, this is the military forum so I will add this: If you were moved out of the area on military orders you get a 10-year extension on the 2-in-5 rule.

Upon the expiration of the Lease and any extensions thereof, Tenant shall surrender the Premises in as good of state and condition as they were in at the commencement of this Lease, reasonable wear and tear from ordinary use excepted.The issue here is there is not mention of a $$ for a Penalty. 

There are a number of great CPAs here on BP with extensive real estate knowledge.

How big is the loan you are going to to take of the extension?

Sign a 3 year extension right now for $250 / M increaseLet them decideNegotiate with the seller accordingly.

-If you are decide you are okay paying top market money then MAKE SURE that the rehab is as extensive as possible. 

All these methods have been discussed extensively here in BP.