Dawn, I agree with the listing agent. If you are trying to purchase the house using a standard FHA 203b home loan the appraiser will flag any deficiency as an "appraisal condition" which has to be satisfied prior to the lender approving the loan. Fannie Mae doesn't like to deal with appraisal condition, which means that if you submit an offer based on standard FHA financing there is a very good chance your offer will not be accepted. From the Asset Manager and Listing Agents perspective you are trying to get a square block through a round whole regarding your financing.
So your next logical step is to either pursue one of the following two paths. If the house in approved for both the HomePath and HomePath Renovation financing you have the option of purchasing the house without financing the repairs and complete the repair project post settlement on your own. This is the benefit of the HomePath loan when some work is required and you have the ability to finish the work yourself. Basically Fannie Mae is creating a double standard in that they are willing to over look small property deficiencies on their REO's.
Your next option is go with a Fannie Mae HomePath or FHA 203k Renovation loan. Both have their pros and cons. When comparing interest rates you would be better served comparing just the rates on these two loan types as oppose to a standard FHA 203b loan Vs. either the HomePath renovation or FHA 203k loan. Even a FHA 203k loan will have a .375 to .5% interest rate premium over the standard FHA 203b loan.
Also, you should look into putting 5% down as this is the "sweet spot" for HomePath financing for your credit scores. Lastly, make sure you budget for paying both sides of the transfer and recordation taxes as Fannie Mae won't pay these.
Feel free to call me if you have any questions. I am available at (410) 552-5912 and one of only four lenders offering the HomePath Renovation loan in Maryland. Also, check out my website for more information on the FHA 203k loan: http://www.rehab203kloan.com.