If we had canceled during the feasibility period, the seller would have received $1000 of that and the remaining $4000 would have been returned to my buyer.Again, it's all very negotiable with the seller.

I hope you are shocked.Now, calmly, on the other hand, if you are just speculating, that is, you are just happy with the general rise in the market, as long as all the old owners remain optimistic enough to keep on sitting tight so that there are few sellers, as long as enough high-tech jobs continue to pour into Portland (doesn't have to be many), as long as there is money in China looking for a way to not just disappear into thin air as in China it might (because at least here in Seattle that source seems responsible for most of the price-raising buying activity), then sure, maybe you are happy to pay 5.5% for the privilege of gaining that speculative increase in equity. 

I'm making the downstairs into an apartment for myself and then renting out the remaining 3 bed 1.5 bath  upstairs. 

We went through a mortgage broker Axia but the underwriting is being done by First Hawaiian Bank.  30% down required, and because the lease has fewer then 30 years we're financing over 22 years (27 years remaining on lease, bank requires remaining years - 5). 

It will be some percentage of the fair market value of the house or the unpaid principle balance remaining on the note, whichever is less.

For now I'm  paying off my 2 remaining seller financed apt bldg mortgages.

We go to the court house and look at what they owe or if loans were satisfied. 

There are valid reasons for both sides of the argument, however in the end, the decision remains by you and only you.

Pay Off Lender: $49KPay Off Investor: $16K ($2K profit)Remaining $1K goes to an emergency fund for the property.

My advice is not to do the parking right now, because I can pretty much guarantee that within the next year or two something will come up on the property that will make you wish you'd saved the $3500+ in reserve for higher priority items.Keep it on the "nice to have" list and just deal with the current parking situation until you have so much money that you feel you have some left over for improvements after all the necessary reserves have been satisfied.