Help! How to adjust an accepted offer

[Laura C.]

This is a problem-solving issue. I am looking for solutions on how to move forward!

The subject property is in San Bernardino County, California.

Situation: We are using a VA loan to buy our first primary residence (we have been through the escrow process before as investors). Found a house we liked that had a lot of potential, and needed some cosmetic work, which the seller had been planning to do (refinish hardwood floors, paint interior, stuff like that). We made an offer, using the seller's agent (yup, I know). We offered less than asking and requested that the cosmetic work be left undone (because we'd prefer to pick the paint colors, etc.). Our offer was accepted. We had the general inspection and a mold inspection done. Both reports came back worse than expected and with some major issues: mold and pest issues, electrical issues--a fire hazard, roofing issues, and an egress issue. With this information, we do not want to move forward with the purchase (remember this was for our family to live in at the close of escrow, not a flip). Side note, we also believe that the VA is going to deny funding of this loan, because of these issues--the roof needs major repair/replacing.

Problem: The realtor is saying: 1) We cannot cancel escrow; we have to submit a repair request to the seller and give the seller the option to make repairs (we saw how this seller repaired other things, we're not interested!). 2) We can only request that safety issues be repaired. It is my understanding that if we, the buyers, are not satisfied with the inspection report, we can walk away and get our EMD back (we can refuse to lift the inspection contingency). She is telling me that is not possible.

Help!: Is she right? How can we adjust our offer? How can we cancel escrow and get our EMD back? At this point in the process, can we fire her and get our own agent?

Any insights and or solutions you might have are greatly appreciated! Thank you!