Is this intentional?

I don't know if you guys have considered the possibility of someone intentionally looking for some kind of ammo to use against you to bring up a lawsuit.

Rich"Even if they did I am sure they would find a way to show they were insolvent at the time of the gain (liabilities exceeded assets) so everyone don't hold your breathe that they would pay any money.At best the amount would be little to nothing.

@Robert Adams My investment strategy is to pay cash for undervalued wholesale/flipped properties with the intention of holding them as rental units to yield cash flow.

Obviously, there was hidden intent there to raise their credit so they can afford the $20,000 diamond advance training. 

The question stated in the subject is one of the areas my mind considered....in particular the question is in relation to purchasing a buy and hold property via hard money or private money with the intent of refinancing.....my train of thought, and it is likely wrong, is that sense most traditional mortgages require 20% down, it is in your best interest to rehab the property to at least 125% of the original purchase price.

Or would it be better to go to a smaller banking institution and develop a relationship with the intent of getting portfolio loans with them in the future (once I get to 4 rentals)? 

The intent is to 1)take the cash out and use it to rehab a property that I will purchase with the cash reserves I have already (80k) or 2) use the cash out to put down on 1 or 2 rentals.

Whatever amount you end up agreeing on be sure to deposit it with a title company / closing agent instead of giving it to the seller directly.Regarding wholesaling, you should let the seller know that is your intention.  

Just don't hold your breath waiting on payment as it's more of an exercise in futility.