I'm a realtor in PA so I'm very familiar with the AOS, and what follows, but buying a property that is not on the market and where the seller does not have a realtor...

AO smith is the same deal with lowes they have a different line they sell to box stores than the supply houses.Personally I prefer bradford white because it's not sold at box stores and seems to be the least problematic of all the brands I've used over my plumbing career. 

Do  you know where I can get a PA Lease Option agreement and AOS?

If he chooses to buy, then an AOS will drawn and proceed as a normal sale.

Yeah.. until the AOS is signed and the earnest deposit is received, there is nothing legally binding them to a verbal conversation or agreement.If they are willing to dump you for the new guy, you may be lucky that you got out of that deal.Lick your wounds, go on to the next one.

They would usually make sense of it on the assignment to AOS gap, but real cash buyers don't care either way.

Read the book: 401(k)aos by Andy Tanner.

Take the ao list and add other qualifiers like behind on taxes, behind on payments, recent eviction, and it will reduce your list from 8k leads to 100.

I don't know how or where you'd get a commercial loan on a O/O SFR, but even if you could, your credit score would still be an issue.

Look at g a r e i a .