Fannie Mae sells house way too cheap!

Please help me to understand. This is a small college town with stable and somewhat rising prices. Fannie Mae listed a house about 90 days ago for $133,000. That was high for the nice planned development where the house is, and about 7 weeks later they dropped the price to $125,000. That was a reasonable price if the house was in good shape, but the house needed new appliances, a new sink disposal, a few plumbing fixtures, and repairs to the A/C. They had painted the interior and installed new carpet, so only the garage interior needed to be painted. Otherwise it was good. It might have needed $10,000 to $12,000 worth of replacements/repairs, including the minor things, payment of delinquent HOA dues, etc.

When the price was dropped to $125,000--again, a fair price for a house in good shape--I thought it was probably too soon to make an offer, thinking that Fannie Mae would probably not take an offer of $12,000 less than that price (and I didn't want to part with the 10% down payment required from cash buyers, if it was likely that I'd have to try to get it back later). I thought they'd drop the price again if they still couldn't sell it.

There were no further price drops, but today I learned that the house was just sold for $85,000, an unbelievably low price for the neighborhood. So naturally I am wondering what might have happened! I am quite sure the condition of the house did not justify the low price, since I own two similar houses in the same planned development and am familiar with their quirks. Has anyone seen anything like this before? Conspiracy theories are welcome!