Values have risen much more than that so the owner pays an artificially reduced amount.  

Spent two months with Big Bank to get a lamo offer and now going to have to take it so I can reduce my debt to income to get financing on another property.

Is it worth the $9,000 in refi costs (these would be rolled up into the new loan, thereby reducing my equity). 

This sounds like a stressful situation for you; I'm sorry to hear that there has been some tumultuous evolution in your past 5 years. 

Some "cons" of the 203k are:MI (mortgage insurance) for the life of the loanUpfront MIP (mortgage insurance premium) can reduce the effect of the 3.5% down paymentCan take 15-30 days extra to closeNot all industry partners (Lender, Realtor, 203k Consultant, and Contractor) are as knowledgeable/experience as neededSlightly higher interest rate compared to FHA 203(b), which is the normal FHA loanCannot repair/add luxury itemsSome areas can have lower max loan limits that what is needed to do a 203kExcept for qualified non profit groups, required to be owner occupied for min 1 year  There are many pros to the 203k, but above are just some of the "cons." 

To reduce evictions?

Some paths do require school and some don't so make the educated decision for your own life.Personally I moved home because of the stress of student debt without a good direction and did exactly that.

If the buying market is tapering off due to fears maybe this is an opportunity to reduce you offer price some.

By locking in our funding, we can eliminate one source of potential distress and we can also 'fix' one of our major expenses by locking in the financing rate Increase your cash position – there will be opportunities to buy distressed assets from people who were not prepared, but you will need cash Reduce Leverage – leverage can be used to provide higher cash on cash returns however along with leverage comes greater sensitivity to any loss of income.

i quickly realized this was taking up a lot of my time and 9 times out of 10 they used my quote to as a negotiating tactic to reduce the sales price, then performed the work themselves or put it out to bid again.