It is also important to look at what type of bank owned property this is. Is this a Hud home? If it is, they sell all homes strictly as-is and are even exempt from installing carbon monoxide detectors. Any change in significant terms whether for the better or worse, will earn the home a trip back to the open market for new bidders. To be honest, only your agent can answer your question at this point. He knows what type of sale this is, has all the contracts, has direct contact with the listing agent, who in most circumstances would also like to get this deal closed and not start all over again. Even the listing agent will be at the mercy of the asset manager's decisions, who needs to follow bank regulations and policy. I agree with the rest of the comments on here that you should work out solutions to move forward and successfully close the transaction, it is the nature of all real estate agents to work out solutions and keep the deal together. But the reality is that in the real estate business sometimes escrows fall no matter how great the agents involved in the transaction are. It is also wise to be "prepared" and have a Plan B. Most of the time solutions can be found, other times they are not and it wouldn't be a bad idea at this time to go out on the field again and try to find a better property while you're trying to work out a solution on your situation. I know the inventory is tight, but it can be done. You and your agent have some work to do. Goodluck.
In addition to Stephen's advice of offering a higher purchase price to cover the cost of the repairs so the seller nets the same amount as you originally agreed upon, have your agent talk to the listing agent. Have him/her offer to meet any contractors doing the work, because the listing agent surely doesn't want to take time out of his day for it, especially if there will be one or more contractors. Even offer to select the contractors (the listing agent will usually say no, they have they're own). Now, at least you're talking. When listing agents say sellers won't do work, they mean the sellers don't want to pay for it, and the agent doesn't want to have to do any extra work. So, have your agent talk with the listing agent before sending any addenda regarding this.
Also, conventional loans are pretty much just as strict as VA or FHA loans regarding repairs. If an appraiser sees ceiling stains, they'll want the cause taken care of, because it affects the structure. Broken windows will need to be repaired because it's a hazard. And, unless the next offer is a cash offer as high as yours, any offer with a loan will likely run into the same issue.
Good luck, I hope it all works out!
Typically on a bank owned property, the buyer is not allowed to fix any items until the home has closed escrow and possession has transferred to the buyer. It should be requested that the bank fix these items in order to meet VA guidelines. However not every bank will do this and it really depends on your situation as every contract is different. If the bank does not want to fix any items, it sounds like they may be looking to cancel and sell the home to a buyer which loan has less strict guidelines or even a cash buyer. Again, have your agent read the contract carefully to see if the seller is obligated to make these repairs, if not you are at the mercy of the bank and they could cancel. Best of luck.
Your paper work will clarify if it is as is. But even if its stated it is lenders my pay. So try the offer first. If they turn you down there may be the possibility to raise the price to include the cost of fixing and net the seller the same as first agreed. Get as much fixed in the sales price as you can. Its much cheaper money than cash or credit cards.
Call the bank that is offering the loan and ask for the manager. Your loan officer should have had all of these questions answered. These are not unusual issues.
A good source of information for yu is Your-Road-Home.com. Read the articles in the numbered order and you will find the site very educational.
Best of Luck, Stephen