If the previous installment of 'Are Asset Managers Predictable...' was heading out into the land of unreliable assertions, this entry will jump with both feet into that environment.
We can see that the behavior of most Asset Managers is predictable because the asset managers' latitude in the decision making process is quite proscribed. There are guidelines for interpreting guidelines. I often describe the way asset management companies conduct the business of selling real estate as "Imagine the DMV (State Department of Motor Vehicles) goes into the real estate business".
All of the individual initiative and case by case flexibilty and none of the accountability that is demonstrated in the functioning of most governmental agencies. But I digress...
The inclusion of contingencies in Offers on bank-owned properties is quite acceptable provided it is understood that the properties as being sold in an 'as is' condition. (In fact, there will most likely be a page or section of the counter offer/addendum from the bank to that effect.) That being said, you can include an inspection and mortgage contingency in an Offer. And the Seller will (usually) respect that contingency. And it goes a long way to protecting your Buyers interests.
As to the results of (a) Buyers' Inspection, most banks/asset companies will not put up major resistance if you want to cancel the contract due to issues found in a Buyers Inspection. As with any contract, be sure that your buyers get the appropriate advice from their attorney/legal counsel before this situation arises.
More and more we are seeing the banks/asset companies directing the Listing Agent to do repairs to properties, not just prior to marketing, but in the course of negotiations. In one recent experience a roof was replaced as a result of Buyer Inspection(*) and another more remarkable case, a whole septic system ($14,000. plus)! But then again, most of us know that you need to do something at times to get a property sold at a good price.
(*) Funny story about the roof; the Buyer could see the condition of the roof (poor) when they first saw the house, but after getting a contract subject to inspections, the Buyers came back after Inspections with 'Needs a new roof' and an estimate from a roofer for some amount about twice as high as it should be. The bank's response was 'sure we'll do the roof prior to closing'. Two new estimates were obtained and roof went on and the property closed. It has been suggested that the idea of the high estimate was to drive the Selling Price down and not bother with the roof, but that would not have been right, so that can't be what the Buyer was thinking.