Maybe your offer will be more attractive to others.I'm not poo-pooing your idea, but I am skeptical enough that I won't ask for an analysis of a particular market. 

I had walked the property and told him he was crazy for not making an offer.

If your lender offers the program they should be certified or trained in some way on the program and can answer any questions you have on it.

There's always fools in this, this is no different.I "lost" out private lending to someone for a full re-do of a house, I was offering 9.5% first and only position.

I envision no rules being broken and neighbor may want to complain but all would be legal so she would be complaining about what laws allow so it would be her issue and not your issue.  

You should located a Commercial Broker in your area to pull Comps for you to determine your offer price. 

They often offer competitive pricing and have a wide selection.- Online retailers: Amazon and Wayfair are good for smaller items like hardware, as you've mentioned.

It is a 2 unit RS-3 that I converted to a 3 unit RM 4.5 because it has a coach house that wasn’t legal which I didn’t know until I basically got to the closing table. 

Technically 5+ units is commercial so many residential lenders won't offer financing in house..

Does anyone know of any similar offerings at any other banks?