Vblue, I'm so sorry. I can't imagine being almost ready to close and it all falls through. I still can't get over the seller though.
I know it's going to take some time to get over losing the house but it may be for the better. It sounds like the house needed some costly repairs that he's trying to pass off on an unsuspecting buyer, which also might explain the low cost.
Thank you for emphasizing with me. The more I read from you guys and talk about it with others the better I feel for sure. Its hard not to be emotionally tied to a home you were closing on in 1 week.
Really it is your Realtor that should have gotten the extension in writing. Extensions need to be signed by the parties and submitted to the lender in writing. This is SOP. Buying a home is full of technicalities and being out of contract is a major concern for everyone.
Personally, based on what you describe, I think it is the best thing as heating is mandatory for an FHA-insured loan and may be costly to repair as pointed out earlier in the thread. The next house will be better. It usually is better in these types of circumstances. You will have to get a new appraisal on the next property, but it sounds like you have a decent lender as they are not charging you for an appraisal on this house.
After the first of the year, more homes come on the market. Many people don't want their home on the market during the holidays and you may find something that is just what you are looking for without heating issues