That's a red flag for a scam.If I got $1500 every time I talked to a biggerpockets.com member about something far fetched such as putting 3.5% down on a $1.5m fourplex in the hottest real estate market in the country where you're up against 25% down as the norm, I'd just do that all day and not bother actually closing any loans.

That was the first red flag.

That's a big red flag to me.

With that said, I don't know anyone desperate enough to hand over 2 years of bank statements...and if they were major red flag...why so desperate?

These are all red flags that this person is one incident away from falling apart and bailing on you.When someone tells me they will be late, I thank them for keeping me updated and remind them of my policy regarding late fees and starting the eviction process.

If we don't put one in will it be flagged by an inspection or specific type of loan?

@Nick Pisano And for your agent to say they will just "sort everything out at closing" is a huge red flag and that means your agent is not looking out for your best interests because any agent should know exactly what that means...

I even asked mail carriers if they knew who owned home .some knew cause they were local and some didn't.

In a hot market, which we are and have been in, depending on the terms of your lease option deal, if prices back up and your tenant buyer cannot qualify in, say 2-3 years, and their is any equity in the deal for the TB and especially if they have paid you 2-5% as a "deposit" or "down-payment", this is a red flag, which could result in a lawsuit. 

@Sean S. umbrella's vary slightly by carrier, but the exclusions are somewhat universal across the industry.