A bank offering a conforming loan wants you to own the property for at least 6 months before a cash out finance.Good luck

However, i found another lender who will do 15 - 20 -25 percent down but my original lender, who is a friend, says this is a non-conforming loan?  

Section 8 in TN has crazy high standards that properties need to conform to in order to qualify for being able to take it.

You could go this route if you find a really good deal, but have a good portfolio lender on hand (that doesn't require a minimum seasoning period to base the loan amount on the current market value/appraised price as opposed to the most recent purchase price) ready to start the refi when you finish rehab (it wouldn't be very feasible to wait out the minimum 6 month - 1 year seasoning period (most conventional conforming loans require a minimum of 1 year seasoning for a conventional loan) while carrying the hard money loan).

Some general rule of thumbs in the conforming Fannie/Freddie market are 6 months seasoning before a cash out refi is allowed up to 75% LTV.

Also, if the building was previously a triplex and registered as such, you may have legal non conforming rights (grandfathered rule) to continue to operate the property as a triplex.

A conventional mortgage conforms to guidelines set by Fannie Mae or Freddie Mac and unlike an FHA, VA or USDA loan, it's not backed by the federal government.

The only thing that matters is what is agreeable to you and the seller.You will have an idea on what is agreeable until you have a conversation to find out the sellers motivation to sell.Once you have an idea on the motivation, try to make an offer that will help with their problem, but at the same time conforming with your buying criteria.You do not need a real estate agent, but a relationship with a good one is important to have.

I have a property under contract that was listed as a 3 flat with a non conforming unit in the attic.  

Most of the lien law related forms have to have very specific language to be effective, hence the reason for the state produced forms, to conform with the law.