If I was your agent, I would help you write letter to the Lsiting Broker and Seller/lender detailing out the issues that were noted in the physical inspection as conditions that impact the value. The property should only sell for its Fair market value and if substantial repairs are required to make it a safe and healthy environment, they would most certainly impact its value. Those condition are now something that the Listing Agent must make other buyers aware of as they are discovered and he is aware. Lenders are limited on disclosure but the listing agent is not as it is his obligation to make a diligent inspection and make pertinent and material reports available to all future buyers.

Make another offer heralding your viability as a buyer including ability to qualify, cash position, credit scores. The lender wants to sell the property and get it off his books but he also does not want to deal with a flake. If you are creditable, I would make an fair market value offer based now on what you know about the property.

Good Luck
Marlene Macbeth, e-PRO, GRI

Refer your question to an attorney.