I'm not interested in paying inflated prices for a primary residence at the moment and would rather invest the money into a rental property that cashflows.I know this is a weird question given the audience I'm asking.

NOBODY turned 10-20% "distributions" from risky syndication investments into a permanent, inflation protected, $17k per month in profits.

All told the property would be worth about 800k when its paid off.I can expect to get about $4,500 gross from the property with an NOI of $2,500 monthly (would be about $3,100 with inflation at that time).

Those numbers would leave a landlord bleeding cash under the inflation rates we have seen in recent years.

you just have to understand inflation happens and dont look at what was happening 5 years ago -it ids not important to your goals. 

In real life, of course interest rates and inflations are much higher.

Are they providing a fair service, or do they encourage boosting claims in ways that may inflate the payout beyond what the insured would normally pay (+ the 35% Metro PA would want in markup for their slice)?

This will especially be important if inflation is controlled.  

It sounds like the bank is selling the property at an inflated price.

This increase is due to a mix of legal work that has been done since the holidays and bigger economic reasons like rising interest rates and inflation. marking a cautious and important time for the market.