Did you sign a purchase agreement stating that you'd purchase the property AS-IS?
Re-examine the appraisal. Check the properties included for sales comps. As Bob stated earlier, if the comparable properties aren't single-family homes, then the appraiser will need to readjust the report to use single-family homes instead for the comps. Again, that will most likely lower the value of the appraisal, which will probably lower the amount of financing you'll be able to get, and which will hopefully kill the deal (due to inadequate financing [assuming you have that contingency]).
Does either your attorney or attorney friend specialize in real-estate or contract law? If not, then you definitely should seek another opinion.
When you checked it out, what was it?
Regarding your mortgage commitment costs__Review your paperwork..
Have you paid an application fee?
How about for an appraisal?
If the lender has had an appraissal done at yoiur request, that is most likely your loss if you choose to back away from the deal now.
If you want to back away from this deal-How about pursuing a different property! Chances are that the current rates are higher than what they were when you received a loan commitment.
If I can be of any assistance, please let me know.