Hi, I'm Scott!
I hope I can help you with some perspective.
Be aware that I am licensed for law in California only, and in any case, lawyers here are not able to offer specific legal advice, rather only address issues of law generally.
The short answer to your question "No! sellers are not allowed to omit important information which would influence ordinary buyers to buy or not buy."
The general rule in sales between those who are not professional merchants but dealing at arms' length is "caveat emptor": let the buyer beware! Buyer and seller are charged with looking out for themselves.
However, that policy has limits, particularly in complex, unique transactions, including real estate.
Sellers may be liable for fradulent statements that induce buyers to buy, or material omission of important facts that also induce buyers and that may amount to deceit.
In a situaltion as you describe, providing an outdated home inspection and deliberately omitting information about significant problems with the property/house, and the problems are such that a buyer is unlikely to discover themelves by their own inspection, may be the basis for a lawsuit based on misrepresentation, which can be based on contract or tort, or both (as it seem here).
'Signifcant problems' are those that make the house uninhabitable until they are corrected, and unlikely ot be discovered by prospective buyers without extroaordinary investigation. One example would be extensive termite damage to internal load-bearing walls/wood such as to endanger the structure; other examples would be pervasive infrastructure problems, like electrics, gas and plumbing that can render the house dangerous or otherwise uninhabitable.
The circumstances described here would seem to indicate not just an omission of material facts, but an intent to deceive by providing an outdated or incompetent home inspection to the prospective buyer.
[Now, if on the buyers own tour of the hour they went through the basement and observed pipes brokens, and spewing water or waste water, etc., and the significant defects were obvious, then the buy will be charged with knowledge and seller can escape liability.]
The cash aspect of this transaction presents complications if the seller has disappeared.
Buyers in this position should contact a lawyer licensed in their jurisdiction for more details on their potential for recovery. And I'm sorry you are having difficulty finding one.
As an alernative, courts are increasingly recognizing the need for individual to persue self-help measures, and you might consider and find resource at your local legal aid or court house.
Unfortunately, in the meantime you will have to cope with the problem and expense yourself. And, as I'm sure you know, legal remedies can take a long time.
Is there a possibility your homeowners insurance can provide some assistance more immediately and even possibly take on the legal remedies? Some insurance offers this, so it may be worth a call to your homeowners carrier.
I hope this provides some helpful perspect -- and if so, I would appreciate a favorable rating.