@James Wise Do you agree with Josh's estimate of 15% down, or have you heard of lower?

the only sign was a patch job on the chimney in the basement, lower than the current chimney pipe.

Most such buildings are in lower class areas or of lower quality construction. 

When it comes to an inexperienced investor trying to figure out comps and value of their new investment, ALWAYS take the lower comps. 

We inspected it on site this morning.Average rent is $550 like the lower one is renting for.

I did a calculation and ended up coming up with something like $600/mo which seems quite a bit high, so I lowered it to 6% just because there is no way my math was right on that.

I agree that it's nice to have consistency and many investors are willing to accept a lower return for stability.

If the pest report states $5000 in damage then you can also ask the seller to lower the price or fix the pest problem prior to buying the house.

Then they contact the auction winner, offer to sell at the auction price (maybe lower, maybe higher) and walk away with the difference. 

I would try to get this lower than $217k IF and ONLY IF you have the backside systems in place to close the deal properly and are prepared to purchase the property should you not find a buyer.