Dana, you're not alone. I have a teleconference twice a week with several (100 or so) other investors, and I network regularly with other groups of investors. I've heard exactly the same thing at least 10 to 20 times over the past 3-to 6 months.

I've personally experienced--and heard about--other slight variations on that. I submitted an offer on an REO roughly a year ago, after having done a walk through with my GC. The listing agent was highly unprofessional; he was indignant and refused to submit my offer. He balled out my agent and indirectly slammed me for making such a "ridiculous offer"--only to accept a similar offer from another buyer 5 months later. One of my mentors has submitted offers on several REOs that were rejected--only to receive calls (several months) later to inquire to see if he was still interested in them.

here's something that worked in my office. Similar situation,offered lower price,bank rejected counter. Contract cancelled. Extremely smart agent wrote a brand new contract at the desired lower price and it was accepted. Go figure!

in my opinion no the buyer does not have the right to the insurance. The homes are generally sold as-is anyway, too many what if's etc. I agree with the last post. lower the price and if the bank says no, tell them see ya! i do hope your buyer did do his own inspection and hopefully the appraisal will be done just before closing.

As an investor, I'd opt to lower my offer price too. Has the buyer ordered an appraisal too?