HUD Home Question

[Angie Hills]

Hi! I am new to the site and am enjoying reading all of the posts & learning.
I found a HUD home forsale - asking 72,500 and the HUD add said 91,000 as is value.
I went to the courthouse database and found the property & it's tax assesed value was around 82,000. (which is usually well under fair market value - correct?)
The HUD site also had a note stating that it needed more that $5000 in repairs therefore was FHA non-insurable.
House happens to be only a couple of blocks from my house & I know a couple of houses in the neighborhood sold recently for 120-130,000 & they were smaller.
Does the FHA non-insurable mean that it does not pass code for FHA to approve a mortgage? How else could you purchase this? Cash, or are there other loans for a 'under' code HUD home?
Do you offer HUD a lower price than their asking? I don't know anything about them - so not sure if they list their homes at their bottom line or not? Would I need to contact a Realator that deals with HUD & ask them for a fair market value?
What would be a good offer and/or profit margin for his HUD home?
Any advise would be greatly appreciated!