If that representation formed the basis of the offer, and it was false, they are outside the exemption from Texas Deceptive Trade Practices Act. 

Plus you have higher taxes and insurance, and you lose the homestead exemption.

If you have lived in your home for at least 2 years out of the last 5 years you should qualify for $250,000 Tax exemption on your gain if you're single and $500,000 if you're married.

However, from what I understand if I do that, it seems I'll lose my capital gains exemption if I don't sell it within 3 years?

Unfortunately lenders who foreclose such as BofA are exempt from disclosures.

The subsequent lease is what relates to occupancy rights and that IS allowed in Exemption #4*Therefore, a borrower CAN lease your property and you CAN transfer beneficial rights as long the owner remains "A" beneficiary

Most of the lenders who aren't average joe type of hard money lenders and are organized as Reg D or A funds with SEC exemptions wont lend to individuals anyway so you need to be an LLC or Corporation.

There were no usual sales disclosure form as they were "exempt".  

The contract consists of:Seller & buyer names4x property addresses, neighborhoods, parcel/lot numbersPurchase price"As Is" languageLead-based paint exemption Seller will maintain good relations with current tenants throughout transactionClosing dateSignaturesSeems awfully light to me, but I also hate the fluff. 

I am selling a duplex that I have owned and used one unit as my primary residence for many years.For tax purposes I have claimed percentages of space as either rental or my main residence.What might be done in a 1031 exchange arena, and should I take my one time exemption on the portion that I claimed as primary residence?