REO Confusion. Please help!

[Johnny Debt]

Hello,

I made an offer on a REO with 20% down and the rest is being financed. I was told that no inspection would be possible after accepted offer. My loan officer qualified me for a renovation loan to fix whatever is not in HUD minimum property standards.

The loan officer told us to bring a home depot person (because they won't charge for their inspection) to see how much work needs to be done and she would qualify me for additional renovation funds for the home. She also told us not to get an inspection because we don't have an accepted offer, it would be wasting our money if our offer was not accepted. However the listing agency specifies that no inspection is possible after accepted offer. We only estimated the cost of repairing the house, however the house has no water/electricity/heating. We plan for the worse case scenario for fixes and qualify for renovation funding from bank.

The contract was sent to our lawyer. A friend of mine told me because we don't have an accurate figure for fixing the home, the appraisal might come up short. He said that if the appraisal comes up short after formal contract is signed we are going to lose our down payment unless we can come up with all cash to purchase the home.

Is there anyway to protect myself from losing my down payment if I go through with the contract? I thought contracts were contingent upon the buyer being able to obtain financing.
I also thought in a renovation loan the bank will appraise the house as is, and appraise it after the renovations are done.
Or is my friend completely wrong about this?

Any help would be greatly appreciated.