What's going on with HUD owned properties???

Normally, new HUD owned properties are listed every Wednesday, Thursday, and Friday in our area and I'm diligently looking for great HUD deals to send to my database. I came across this awesome deal of a home located at 212 Frank Cook Rd in Newnan, GA.

This home was perfect!!!

It featured 3 bdrm/2 bths plus a bonus room!!! Vaulted ceiling, gorgeous fireplace in the family room, AND it sat on a HUGE 1.4 Acre lot across the street from a middle school!!

It was priced to fly off of the market at $60,000!!!

I emailed this home to my database and met with a client to tour the home. She FELL IN LOVE WITH IT!! The house was perfect for her and her 3 year old daughter and it was in really close proximity to her parent's home. Knowing that the property was priced to sell and it would be a competitive bid, I advised her to slightly bid over the price of the home. I also advised her that the appraised value of the home was the list price ($60,000), so that she would be responsible for bringing the difference between the bid amount and the appraised value to closing. She considered it and opted to offer $60,500. I inputted the bid and we waited (patiently, of course) for the bidding period to close.

After the bidding period ended.....

I checked my email and saw my little "Dear Vanessa" letter advising that they'd reviewed my offer, but decided to accept another bid as the winning bid. I quickly reviewed the bids and realized that they'd received 25 offers on the property!!! The winning bid was 25% OVER THE LIST PRICE!!!! I WAS STUNNED!!! I contacted PEMCO (HUD's approved M & M Contractor for our area) and spoke with one of their reps who told me that this was something that they've been experiencing over the past few weeks. Apparently, buyers are significantly overbidding on properties to ensure having the winning bid. The huge DOWNSIDE is that their Realtors are not informing them that 1)FHA will not allow the purchase price of the home to exceed the appraised value (unless a repair escrow is established) and 2) if financing through conventional, the buyer is RESPONSIBLE FOR THE DIFFERENCE!!  She then informed me that after realizing their dilemma, the Realtors are contacting PEMCO in efforts to try to re-negotiate the purchase price!!! HUD refuses to re-negotiate the price, the contracts fall through, the homes are re-listed.....then the next idiot comes along and significantly OVERBIDS.....and the saga continues!!!!

Has anyone else experienced this???