The house was therefore listed AS-IS.The OD rep admitted that they had made a mistake by not revealing to us that they had not done the repairs.

Being hard to work with does not constitute an unqualified applicant (even if it were revealed prior to approval). 

I replied back that a simple google search reveals your husband's sex crimes and we have a no felonies and no sex crimes rule.

BP family,What actions can you take if you have purchased a property at a foreclosure auction and your inspection reveals; water damage, termite damage, serious mechanical problems ect, and come at a large cost to fix?

If these are the things on the surface, I would imagine that bigger things would be revealed during the inspection, at which point I would like the option to walk away if I so choose without losing money.