You can always re-offer, but be prepared for a wait with Fannie Mae.
A recent attempt at purchasing a FM house resulted in delays, confusion, and general distrust of the company. My client put in a good offer, and it took 6 weeks for the offer to be reviewed (and accepted), and another 2 weeks for them to get us the final documents to be signed. Then, when we backed out properly under the terms of the contract, it took them another 4 weeks to say we need to sign their form, and then 2-3 more weeks for the earnest money to be released back to the buyer.
This was in the Macon area, so hopefully you'll have more luck in Atlanta! But, you may want to consider another seller if possible. Oh, and in our case, the offer was for slightly above list price.
Something you may not know is that banks and Fannie Mae/Freddie Mac will often keep reducing the price on a foreclosure monthly until they sell it or they hit some "bottom dollar" number they've set as their minimum sell point. So, you could wait until they lower the price again or just take a stab at the offer. Keep in mind that if the house is only worth 175k to you, then that's all you should pay. If the market value is higher, then others will likely out bid you. Never pay more than what you want in a bidding contest. It's a good practice to set a maximum dollar you want to pay in advance, tell your Realtor, and don't go above it.
On occasion, you'll get a chance to put in your "highest and best offer". This usually occurs if there's several buyers putting in a bid. There is usually no negotiation in these cases, and you won't get another chance to re-offer...you put in the highest bid you're willing to make for that specific property. They owner then chooses the best offer.