There must of been a misunderstanding on his part, they don't have FHA police to see who's renting what units.

This is what makes for a market and it is why the ratios cited in the OP are subject to abuse, misunderstandings, etc.

If I'm misunderstanding the situation, please clarify.

Education pays for itself many times over in preventing mistakes, misunderstandings, avoiding other losses, etc.Absentee owner properties have their value certainly, though wholesaling may not be one of them.

People misunderstand business because they think like employees. 

Also, I may be misunderstanding your post, but your RE agent tells you only nine comps have sold in the past year, and even then only at $95k?

Ah, sorry for the misunderstanding.

Do not take an approach that this is some misunderstanding and can be resolved by the OP.  

Maybe I'm completely misunderstanding the structure of the 'crawl space' but you said there's 6-8" between the ground and the joists.

I see some misunderstanding of how mortgages work here.