We have an application for a cash-out refinance and have discovered that the property is listed for sale. We want to decline it, as we can't sell the loan to our investors. My question is, what "reason for decline" do we put on the Adverse Action Letter?

I would use the "other" line and state state the facts of why you can't make the loan.

We have similar situations using the "Other" box from our Secondary Market division.
They mark "other" and then reference the guidelines from the investor.
We have requested that the SM scan a copy of that snippet of the investor's guidelines to our file to back it up.

example:
"Section 184 Guidelines require no negative history on bank statements."
"Number of financed properties exceeds program guidelines."

1002.9(b)Statement of specific reasons. The statement of reasons for adverse action required by paragraph (a)(2)(i) of this section must be specific and indicate the principal reason(s) for the adverse action. Statements that the adverse action was based on the creditor's internal standards or policies or that the applicant, joint applicant, or similar party failed to achieve a qualifying score on the creditor's credit scoring system are insufficient.

I agree. You can't quote the guidelines from the investor. For example, "Number ...exceeds program guidelines" doesn't tell me how I can fix the issue. I don't know what your guidelines are or how many properties I can have. You need to give me that specific information.
Thus, you can still use the "Other" line on the AAN, you just need to give specific reasons for the adverse action.