Like John - I'd be curious to know what the managing broker says. A listing agent does have a responsibility to submit all offers. I would have your agent (who is supposed to be advocating for you despite office relations) encourage the listing agent to just turn it in, even if they already know that it's going to be a "no". If the seller says no or doesn't respond, then so be it. At that point you can walk away.
Like wetdawgs, depending on the seller (and contract) you are working with, the inspection may have simply been for peace of mind and not for re-opening negotiations (several banks specifically state this in the contract you sign - so you may want to double check).
The only time I've successfully been able to negotiate for the bank to do any work for a buyer is if something shows up on an appraisal that would keep us from getting financing. In that case, I have seen a bank agree to doing work to get to closing...but that has been rare.
Keep in mind that Rodent and Insulation issues in the Crawlspace are incredibly common in this area and can really add up (depending on the damage). I just had some clients get a quote for over $6k to remedy all of the rodent/insulation issues in a house.
Best of luck!
Ryan Halset
Realtor | Seattle, WA
Source: http://www.zillow.com/advice-thread/Listing-Agent-Refused-Inspection-Response/464213/
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