The verbal agreement was due to RCFE state regulatory rules that kick in when a formal offer has been made and accepted. 

Consider filing a complaint with their regulatory agency.

It also seems unlikely the 10 Year Treasury rates will creep up significantly all on their own.My biggest concern is the potential regulatory burden we are facing.

As they are licensed, you have the regulatory body you can go to for any help if a person tries to burn you and it can cost them there license.

Purchase price: $360,000 Cash invested: $130,000 (including 40K for reno)With all of the regulatory changes happening in California for multi-family properties and the high costs, we decided to expand our search to the supremely hot market that is SLC (a quick flight from LA).

As a heads up, development is extremely regulatory and politics involved and changing developers can change those situations and approvals, that needs to be a key part of the evaluation.

The situation I described with service providers is very real and the city doesn't do small developers any favors on the regulatory side. 

I'd look at insurance rates and regulatory challenges you may run into. 

Additionally, if you get found out for mortgage fraud, that could make the lender who issued the loan to you look really bad to the regulatory agencies which could negatively impact their career

@Travis ElliottAfter the 2008 crash, the Dodd-Frank Act basically added extra regulatory oversight on bank lenders.