First REO - unmet reserve, Direct Offer bid advice

[Andrew LaBorde]

Hello, 

I am a roofer/contractor and I am looking to purchase a local REO and have been watching it for a few months now. It was up for auction with a min bid of apprx. $40k and is assessed/valued at $120k. I've checked local public data and it last sold for $120 a few years ago to a couple who are now divorced. I'd value it similarly but but it needs some repairs that I can see from the exterior. Very liable in a nice area whereas the average home value is $130k-$150k. I could see if selling for $60k-$90k depending on the work needed inside if a realtor were to list it for a regular mortgage instead of cash only. The unmet min reserve bid was about $35k and my significant other and I were interested and would have put in a bid, but don't have that much cash on hand.

Question. How low can I go? I'm not trying to lowball but my significant other and I only have $20k set aside for downpayment and family credit of a similar amount for repairs if we're in a big mess. Will they accept $20k if $35k went unmet for months? I can show proof of need repairs to help drive the cost down as well. A neighborhood home sold for $36k a year or so ago that I discovered too late through REO.

thoughts?