I think you need to talk to the seller. Tell them what you have found out and how much it will cost to fix it. Ask if you can get a deal to lower the price. Negotiate and see what you can work out. If you really want the house, then there's no point losing it without trying to keep it. After that decide if you can live with buying it for the price you can get the seller to agree to and fixing the house. You need to make the best decision for yourself. It's important to make sure that you are comfortable with what you are getting into.