Fix it. Painting is not really complicated job and you can do it easily. Fixing concrete?. Probably you should use special mix with vinyl? inside - special for very thin applications so is going stick well to old concrete. of course use hammer to clean/ make the existing surface little bit rough so is going stick well. Any particulars about concrete you can easily learn from available handyman books. If you are not going do that you are going of course loose the money you already invested in appraisal etc. Plus you are not going get the house. Finding inexpensive house suitable for FHA financing is quite a challenge. In my area (northwest Chicago) In my estimate below 200k there is about 1% of homes suitable for FHA or with small repairs needed. The rest are ruins owned by banks. Cash Construction loans only. Typically with mold in the basements, sometimes missing furnaces, damaged wood floors due to the moisture in unheated house etc.
It think you may be really lucky to have opportunity to get this house with your financing. I have had in past few months several customer doing extensive repairs before the appraiser visit. With few $K in repairs invested in a house they do not own this is nerve wrecking but only way to get such house. If the house is in perfect condition there is usually quite few buyers competing and raising the prices, so actually I see such small repairs as a blessing - It keeps competition away.