Enter a Buyer into a Purchase & Sale Agreement WITHOUT AN APPROVAL?

Has anyone seen this happen?

I recently had a client who really wanted a new home, even though I advised them they needed a 620 fico as Self Employed for 100% financing. They were driving through a neighborhood, only to stop at the builder's office to ask more questions. For sake of privacy, we'll call them "4 Corner Homes". The builder/listing office entered the client into a Purchase & Sale Agreement that "would work for them" telling the client it would be "no problem" to qualify by closing.

My client didn't have the 10% down they wanted, so they accepted $2,500 and $1,000 per month until closing 4 months later. To my surprise the client comes back to me and said they were able to get "an approval" from this listing office with in house financing. I've explained that an approval can't be contingent on having the necessary credit score at closing. The listing office even went as far as to say they had "special programs" and I must be inexperienced. They never ran their credit or saw their DTI. They also never offered a Good Faith Estimate.

Now that the client is locked into this agreement, the in-house financing of this listing office has admitted they aren't approved unless they get the 620 score. The agent that had been representing the buyer moved out of state, so really no representation was ever given to the client.

The client understands now how they were being deceived, while I was being honest with them. Sometimes we don't like what we hear, but need to follow the advice of the expert and ask more questions. I still have them as a client because of this, but need their score up 2 points to qualify and we have 40 days until closing. For every day we are late of closing, it will cost $100.

Does anybody else see anything wrong with this transaction?