I would love a chance to talk to your realtor. The truth is renovation lending is a tremendous product provided you work with an experienced loan officer. Many folks have access to the loan program, few of them actually close these loans regularly.
The key to the programs is to make sure the lender has control over the entire process from application to final disbursement. If you work with a lender that corresponds the loan to another lender they sell the loan after you close but before they disburse funds. It can create sticky situations.
You say "Lawyer stated we could not keep any of the downpayment." Was that your lawyer or the would-be buyers'? If it's the buyers' lawyer, what does yours say? (Don't trust a lawyer representing the other side.) If it was your lawyer, then I defer to his/her judgment. Still . . .
Others will point out that your agent should have made sure at some point in the process (the sooner, the better) that the buyers were pre-approved or at least pre-qualified.
Unfortunately, it's virtually impossible to force someone to buy your home. And though it's not a pleasant thought, your best prospect is still the #$%$# buyers.
However, you also might want to re-examine your relationship with your Realtor. I obviously don't know the details, so I can't make any suggestions. (And even if I did know the details, the Code of Ethics would severely limit what I could say.) But perhaps there is reason to believe that another agent might have handled the process differently. Just something you may want to think about.
If you don't have an agent consider the services--there are no set standards as to percentages off when making an offer, however any fair bid will open up the negotiating table--you need to be aware of recently closed similar properties in the immediate area--factor in repairs, extensive or cosmetic--review the data and make a determination as to a fair offer. Do keep in mind that if a property is priced on target for today's market or slightly below, multiple bids can come into play--your agent can best advise you.... more