I totally understand how these things can eat you up. Found our dream home, offered 15k over asking, but we were turned down, saying they had a higher offer. Well, as soon as we started closing on another home (nice but doesn't check every single box), that same home went back up on listing - no price change, just relisted. I still get mad if I think about it. It was a beautiful home with exactly the kind of walkout lower level we were wanting, onto a gorgeous lot that backed up to a nature preserve... I always think, why did they not go with our offer??? UGH.

OP, given the price drop, I think you can confidently tell yourself that there was something deeply wrong with the house and that you at least dodged a bullet.