HUD rejecting deal - Appraisal came back too high!!?

[John Vietmeyer]

Has anyone had HUD reject a deal because the appraisal came in higher than the accepted offer?

I accepted a counter on a REO at 133K and they are now saying the offer is conditionally accepted because the bank's appraisal came back higher than the offer price. They say the "ultimate decision lies with HUD".

While I have signed on their paper they have not formally ratified the contract and want to know if I am comfortable proceeding knowing this contingency.