Back out first Offer during contingency period

[Jerome Mosetic]

Hi All

My partner put in offer for first time home purchase which happened to be a bank owned foreclosure property. The terms in contract state that this" is as" purchase.

We were aiming at doing in a live in and flip on this property
Her offer was 12k above list price as there were multiple offers, our offer was accepted

When we viewed the property the home was winterized, and there was no power of water on.We really like the location, and planned on doing full remodel as the condo had a lot off potential.

The utilities were turned on for inspection

We just had inspections done and the HVAC unit was not working/cooling down the space, there were a lot of smaller items but the HVAC issues warranted further investigation

We then proceeded to get HVAC contractor specialist for further inspection and they said it could be repaired but since this unit was 2005 unit is is highly recommended to get a brand new unit as the reliability of the old unit and the repair is not guaranteed 

We have now decided that we would like to back out the deal while still in time period for inspection contingency, especially since we are offering 12k above list price, the new HVAC unit could cost in this range or above

What's your thoughts on our decision, our understanding is that seller(bank) will not negotiate due to bought "as is" 

What are chance that they would accept a different offer?Our thoughts now are knowing this we would only put in offer below list price knowing this defect?

Any words wisdom would be great