Urea formaldehyde was a form of insulation added to homes several years ago. It was a type of liquid foam sprayed into walls in older homes that weren't built with wall insulation at the time. The liquid foam found its way into the wall's nooks and dried, forming a good insulator. Problems seemed to come right after the insulation - many people got sick from the formaldehyde part of the product, and they continued to do so for many years afterwards. In some cases the walls were taken apart, and the insulation was removed.

Current studies indicate that after several years the problem seemed to go away. There is an extensive site dedicated to this issue from the EPA, available here. Knowing the facts can help you make an informed decision when you are ready to make an offer.