Big change of plans!!

[Mariana Skonieczka]

I recently won an auction for a house. (Judicial tax sale so we couldn't go in before to check out the inside.) I paid $29,000 for a small house on a 1/3 of an acre lot in a great area. The houses on either side are adorable and fixed up very nice and this house had nice-looking vinyl siding.
We finally got into the house today to look around and it's bad! It is a ranch house and the walls are buckled. The ceiling in one bedroom has totally collapsed and there were acorns and dirt everywhere. The frame and underlayment of the roof is soaked and there was mold everywhere. I easily put my finger through the ceiling that was buckled. We made our way down the ladder-like stairs to the basement and we couldn't stand up. There was a puddle in the middle and 2 hot water tanks tipped over. In a connecting room in the basement there was a huge pile of dirt up against the wall. The foundation in the back of the house was crumbled and missing huge chunks of concrete. All the wood trim outside has rotted.
Here's my question. Our only option seems to be demolishing this dilapitated pile of XXXX. Has anyone been in this situation? Do I have the demo done and sell the land? The land in this township goes from $35,00-$75,000 for 1/3-1/2 acre. Or should I build a small house and sell? Prices in the area go from $90,000-$129,000. Any advice?