Leaking Sewage Line

[Arthur E.]

I'm getting ready to have my first property under contract and I just introduced myself to the neighbors.  They have been in their home for about 34 years and I actually dated their daughter 20 years ago (small world).  The husband asked me "did that a**hole agent tell you about the sewage line?".  I said no and asked him what he was talking about.  He said the last lady that lived there didn't have any money so she couldn't fix the sewage line, but he says it's leaking near the house.  He says every time you flush the toilet the air starts to reek of raw sewage and you can see bubbling on the ground above where the pipe is.  I can't test this yet because the house is still winterized.  The neighbor said that the city came out to fix the problem but what they did didn't remedy the problem.  He also claims that he told the seller's agent about this but that he's hiding this from potential buyers, but he's telling anyone he sees touring the house about it.  The pipe that runs from the house to the main in the back alley is about 50 feet long.  This is a foreclosure through Homepath.  Is this a deal breaker?  Should I walk?  Is the agent being unethical?  Is he breaking the law?  What is Homepath's obligation?