Buyer's agent..why didn't you advise him? OR did you?

I am an appraiser in the Huntsville Texas area...recently I went to a house in Livingston about an hour from me...sounds far, I know but here in Texas things are far....but that's not what this is about...

The order I received from a Management company was for a purchase...I called the owner to set up the appointment. The house was tenant occupied and he went on to tell me how he was giving the buyers $7000 back for repairs because it needed a little work...

Now, I haven't mentioned, the financing for this home was reported to me as FHA and that I was to perform an FHA appraisal. No problem on my side...BUT...I'm sure wondering about this but can't judge until I see it.  Here's what I find:

1.  The house was built pre 1978...the exterior hadn't seen paint in 40 years...chipped, cracked and peeling paint every where.   That alone is enough to stop this going FHA unless it's fixed.

2.  Wood exterior that was rotted all along the bottom in many places.

3.  There was no furnace...well, the shell is there but the workings had been stolen and the tenants used space heaters through out.

4.  The house has moved or maybe the fireplace has moved..whatever ...but the fireplace bricks on the outside are pulled away from the house.   That one I'm not qualified to say if it's dangerous or not...I"m not an expert or home inspector.

5.  The tenant wouldn't let me turn on a light in the bedroom...a single bulb hanging on a wire...with panic in her voice she informed me they didn't use that light -- or the one in the hall that looked the same.  Again, I'm no expert but I'd say one is needed here.

6.  The appliances in the kitchen were nice and relatively new...good, I'm thinking....until the tenant says, the appliances don't stay they belong to me...  Really? even the stove???  Yes, she says...hmmm, empty holes where the dish washer and stove belong.

FHA has relaxed somewhat on repair items but not this much. There were many cosmetic issues too but they do not affect FHA financing.

Now I have to wonder, why did the buyer's agent let this buyer think FHA financing would work?  Or buyer, are you not listening to your agent? The one you are trusting to assist you and guide you in purchasing a home?

As an appraiser, I could have, probably should have just completed the inspection, typed the report and turned it in as I saw it..calling for some inspections and carefully documenting and reporting  what I saw..but...instead I called the AMC who hired me and explained everything to 3 people what I saw...and now:

The order is now on hold waiting for the lender/client to figure out what they want to do.    There is no way $7000 will fix that house to pass FHA guidelines.   I suppose they could have applied for an FHA 203K renovation loan but they didn't...so now, if the seller won't repair the house to meet FHA guidelines the buyer has to obtain conventional financing or pay cash? Will the deal fall through? Hard to say for sure but there is that possibility...

I'm not sure what the buyer's agent did or didn't do as far as advising the buyer...but I truly hope it isn't that he didn't know this house was not FHA worthy.