I don't know if I would pass but I would certainly spend some time getting to feel comfortable with this home. 12 years of water damage is not to be taken lightly. I would certainly have the sellers pay for you having a structural inspection of the home. A structural engineering inspection is way more indepth and valuable then a run of the mill inspection you have had done. I would be very, very curious about mold now. Not only will it effect the resale value it already has if I'm the buyer, I would be wanting a discount above and beyond anything you have already settled for on this house. This is not the average purchase now. You are buying a home with a defect of unknown proportions and future potential and if I couldn't get my assurances through an engineering inspection, a 3rd party approval of the fix and a discount on the home I would not buy it. But if I got all of the above then you may have a good bargain in the long run.