Peeling paint, whether it is on the exterior or interior, sends a message that you really do not want to communicate. This is a maintenance issue and to the flipper, the contractor, or the investor, peeling paint is a good thing because it makes the house look bad and devalues the property. He or she knows how much it will cost to repaint and whether or it can be fixed.
On the other hand, to the prospective buyer, it is an indicator that you have not maintained the property. If you have not taken care of the visible part of the house, what else is there that has not been maintained? Here again, you risk feeding that unknown fear factor and ruining your deal.