It would cost me about a Million Dollars to fire her; so, in an effort to keep peace I smiled and said "I can fix that".I have tried skim coating and am finding that any moisture from mud or primer causes blisters under the paper.

Look for any cracks, moisture or decay in the foundation, especially if it's brick or stone.

We had a radiator heat pipe fail and it took the tenants months to notice the moisture accumulation.  

I only recently bought the property and have repaired the leaks I can identify, but one appears to be coming from the outside entryway of a neighboring attached building - essentially, the entryway is badly graded, causing water to pond in the area where the building meets mine and penetrate my basement.

When mixing this don't make a mess, follow the instructions, and add a little dawn dish soap (helps penetrate waxy leaf coatings).I've personally had ryegrass sprouting with an 80 percent germination rate after 7 days.  

Particle board if expose to moisture will bulge in few years.

The moisture - bleach - will seep into the grout slowly, all the better to perform the bleaching.  

Your FIL probably hadn't jumped into overalls and crawled underneath the house - any contractor that does and who has your interests in mind would be able to point out first signs of termites, mold, moisture and things like obvious cracks in foundation that old houses are famous for.

However; it may have penetrated the sub floor, and that will need to be replaced.

It only takes a couple inches of penetration to cause serious damange to internal organs.