Phil hit the nail on the head.
You need to make sure your Realtor is up to speed with all facets of your transaction. Everyone who is on your side of the fence should be working together to get you the best deal and close it smoothly. If you can't trust someone helping you, you need to evaluate why and make necessary changes.
203K loans have an after improved value appraisal that is conducted as part of the underwriting process. This appraisal takes into account repairs and improvements you will be doing as part of the 203K loan package, and is in place to help prevent you (and your lender) from being underwater after work is completed. If 203K is an option you are considering, you should be working with an experienced 203K lender to help you understand the process. Your Realtor should also be familiar with 203K so they can help you get into a "viable" contract. It makes no sense to place a contract on a property only to find out that the amount of repairs needed exceed the after improved value. You deal will not close, as Phil mentioned.
Not every property will work for a 203k. For example, a property may be habitable or near habitable, and a buyer (because of location, or some other unique factor) may be willing to pay for the utility of some of the properties marginal attributes (such as out-dated but functional HVAC, Electric or Plumbing). In this case, to get the property under contract, you may have to raise your offer to a point that may not work for the after improved value if you are going to replace these outdated systems.
Your agent is the first one to go to a property with you, and should be familiar with local construction codes, methods, and cost to help you begin to understand what it will take to renovate a particular property. By no means am I advocating that you should you rely on your agent for an estimate, even if they are a contractor. You should always get written estimates from licensed, insured contractors with excellent references and a good track record. The lender will also enlist a specification writer who help you (and them) determine the actual cost of renovations. I am suggesting, however, that a good agent will help find the right candidate property for a 203K at the right price, before too much time, effort, heartache and money is expended.
Best of luck.
Keller Williams Chicago Consulting Group