Then we primed with Kilz just be cautious if it is the oil based one it will have a very strong odor, after priming we painted the entire unit. 

No harm, no foul.

No harm no foul, but a light should go off when you are telling a lender or anyone involved in a deal something other than the truth and full disclosure.

Yes, pets caused the odor and we had to have that treated,  so gross.I am 100% sure that he's not getting his damage deposit back, nor the non-refundable pet deposit.  

What I suspect is that it is a 3 bedroom system (main house has 3 bedrooms) and that somewhere along the way the 4th bedroom (studio apartment) was illegally connected to it, overloading the system causing excessive odor and runoff.

If you state "No commercial activity of any kind" and you let someone operate a home office in their unit no harm no foul.

Overall though I'm not sure it's a problem as the ones who would cry foul about it probably aren't going be the best sellers anyway, but I'll keep websites separate just to be on the safe side.

You get your EMD returned (which should never be given to the seller directly EVER. always use a 3rd party to hold your EMD) and are able to walk away, no harm no foul.

The odors that are being released are obviously the body decomposing.  

If you promised the tenant you would have them installed to have them sign the lease, then I think they deserve some kind of solution from your part, but you didn't go into those specifics..but nevertheless, I would be pretty bummed if I were your tenants..It may not be grounds to terminate the lease, but it would be grounds to have a pretty foul relationship with your tenants..