Is my FHA loan Dead?

[Josh Dillingham]

I'm about a week out from closing on a property, the FHA loan has been underwritten, should be getting the final loan papers to sign in the next day or so then I get this:

"Upon review of the appraisal, there are issues with the property. The property does NOT meet FHA minimum standards as per FHA handbook 4000.1. The following needs to be finished.

1.Exterior peeling paint and areas that are not vinyl sided need to be painted. There is the possibility of lead paint on the exterior and interior. ($4000)

2.The kitchen, bath, and bedroom has missing trim, floor cover is old.  ($4000)

3.Second floor hall has missing ceiling, with plaster fallen. ($750)

4.The stairs kick plates need painting, the upstairs bathroom needs scrape and painting as there is peeling. ($1000)

5.The furnace needs to be inspected for safety and if it is adequate. The furnace appears to be very old and while functioning may not have much of a remaining life. ($100)"

I was aware of all of this needed work and it is factored into the asking price of the house. This is a short sale (already approved by the bank) and the seller is not in a position to complete this work before the sale. Is my FHA loan dead? I don't have the down payment for a conventional loan at this time. could a FHA 203K loan (for houses in need of repair) still be an option? or is my deal officially sunk?

any advice would be GREATLY appreciated.