(1) Determine the ARV (after repair value) of the property. What will it be worth in good condition? (Get your Realtor to do a CMA and explain that you want to know how much it'd be worth in good condition.
(2) Take 90% of the amount in (1) above. [That's to allow for any errors in the CMA and to allow for a continued soft market.]
(3) Determine the repair costs.
(4) Add 20% to the amount in (3) above. [That's because repair costs are almost always higher than the estimate. It's also to compensate you for your time and effort in managing any repairs.]
(5) Subtract the figure in (4) [the repair costs plus 20%] from the figure in (2) [90% of the ARV] This figure is the most you should pay for the home. Hopefully, this number is above the asking price of the bank. If so, pick a figure somewhere above the bank's asking price and below the figure you came up with in (5). The more you want the house, the higher the number should be. But don't offer more than the number you came up with in (5).
That's what you should offer.