HUD homes and 70% rule

[Jeremy Gengenbach]

I have been looking at foreclosed houses in Houston, TX trying to find a property that I can force equity into. Today I visited 2 HUD properties that interested me because of their condition. I knew they both needed some extensive work and estimated rehabs from the pictures on the MLS. Before seeing them in person, I felt like HUD would never accept my offer and I was wasting my agent's time even asking to make an offer. After seeing the properties I found more damage/necessary repairs, which added to my estimated rehab, and lowers my max allowable offer.

I read that HUD is looking to collect 88% of the list price which I can understand for their houses that have been repaired. But it doesn't make sense to me in these properties. One house is listed at $107,000 and the other at $130,000, which means HUD is looking to collect around $94K and $114K. My estimated ARV's are $115K and $150K

However, the first house is a full gut with possible foundation issues and the second needs over $30K in rehab. In both cases the rehab alone puts the houses below HUD minimum offer, add the 70% rule and its mind blowing.

Should I ask my agent to make the offers ? Is there a way to dispute the asking price? 

Should I forget HUD all together?