You can present an offer that aligns with your financial goals, but be prepared to walk away if the seller won’t negotiate to a price that ensures you’re not left in a tough financial situation.

And while it is not your job to be an expert loan officer, it certainly helps to avoid these situations. 

Quote from @Jason Hatfield: @Jaycee Greene  they require a non refundable deposit and give 48hrs to see proof of funds I would suggest developing a relationship with an HML/PML that would give you a "guidance line" that would basically be a "pre-approval" for situations like this to present to the buyer/auction company.

Your opinions/experience on this situation are greatly appreciated.

I think they just see the lower rent and run with it in that specific situation.

They are really the only ones that can give you an accurate answer to your specific situation.

As for the decision, it's really tough for any of us to say without knowing your goals, your situation and the numbers on this particular house.

I love doing these types of deals—not only because most people avoid them, but also because it’s rewarding to help sellers in these situations.

Phoenix contains a rare combination of elements that have created an outstanding market for distressed property investments, including the following:Cost Savings: Distressed properties are sold below their market value and enable investors to take hold of properties at a trifle compared to traditionally listed properties.Strong Market Fundamentals: Being among the fastest-growing cities in the country, Phoenix ensures a high demand in housing and rentals, hence good potential for resale or income from rentals.Value Creation Opportunities: Most distressed properties need renovations; thus, such situations present opportunities for investors to increase equity by adding value.Population and Economic Growth: Phoenix remains among those cities in the country which are attracting more and more residents and business; therefore, this presents good, long-term appreciation possibilities of property appreciation and income creation.Challenges to ConsiderWhile the rewards can be great, distressed property investment is not without its challenges.

I've worked with proformas with 2 loans that could probably work with this situation.