See http://www.heraldandnews.com/members/news/frontpage/article_...
I helped a friend through a foreclosure recently, and throughout the process you sign and are told MULTIPLE times that the house is "as-is." These people should have inspected. You get what you pay for, and I'm sorry they are out 36k, but this is no different than buying a new ferrari from a used car dealer for 10k and asking ferrari to send you a new engine.
From the article: "They found a couple of smashed windows, and knew they’d have to put some work into it, he said. A handout from the U.S. Environmental Protection Agency informed them they were responsible for detecting asbestos, lead paint or other common health hazards associated with older homes."