Opening bid vs REO asking price

[Christopher Camerano]

Hi All, 

I'm considering purchasing an REO for a primary residence. I've looked at the sale history, and this particular property had an opening bid of 175k, didn't sell, and is being marketed at 345k. I have a few questions about this...

1)  does this present a red flag about the condition of the home?

2)  any suggestions on what should be offered based on this knowledge? (Homes in the neighborhood are high 300's to low 400's)

3) bank states addendum on accepting of offer - not sure why,  but that makes me nervous as hell.  Do I have the right to walk away if the addendum is outrageous? 

First time buying REO, TYIA!