First Time Buying REO

[John Schnyderite]

My fiancee and I put an offer in on a Fannie Mae REO. She would be a first time home buyer and we would use this as our primary residence.

At 3 weeks on the market we offered 335K on home needing major repair, priced at 430K. Other offers came in and we were asked for highest and best -- raising our offer to 340K. Fannie Mae countered at 425K and we rescinded as it seemed their value of the property was far from ours and they weren't going to play ball.

Fast forward to the 6 week mark, the property is still on the market and lowered 7% to 400K. I contact my realtor who spoke with the banks realtor. The rejected offers on the table and even got another offer or two in the following week which were also rejected.

We placed another offer at the same value we had prior, 340K. We heard yesterday that they had countered again (at 395K) and realtor said no other offers on the table.

Does anyone with experience purchasing REO's have advice? I feel like I want to stand my ground as comps I've found within the neighborhood, simalar age and sq ft (though admittedly 9 months old) are around 440K on average and this house needs 100K in repairs. My fiancee's parents think we should throw them 350K as FINAL OFFER and see if they bite. I'm not sure that would get the deal done however and if it goes to another round, I don't want to play the card that we have or would 350K.