My subcontractor told me the bank priced that REO to move, and I said yeah but move to where

Your tile guy just gave you something most people walking that property do not have: a specific failure mode, a repair range, and a read on whether the bank's pricing reflects either.

Asset managers at banks price REO (real-estate-owned, meaning the bank took the property back after the previous owner could not pay) by running comparable sales, meaning recent nearby sold prices on similar homes. They almost never do invasive inspections. The bank is not hiding the subfloor problem; they genuinely may not know it is there, or they know something is off and priced to reflect "some deferred maintenance" without knowing what that actually costs.

So your question answers itself: the asset manager probably did not walk it the way your tile guy did. "Priced to move" means they want a fast close. It does not mean the price accounts for your specific repair.

Here is the number that matters now. If the after-repair value, meaning what the property sells for once it is fixed, is say $240,000, and you need $187,000 to buy it plus $13,000 worst-case to fix the bath plus your other holding and closing costs, you need to check whether that math still leaves you enough margin to justify the risk. Many investors working REOs target a spread of at least 20 to 25 percent below after-repair value before they move forward, though that threshold shifts based on your financing cost and exit plan.

The thing worth confirming before you do anything else: get a structural or general contractor in there to look at those joists before you make an offer, or make any offer contingent on inspection. Banks sometimes accept inspection contingencies on REO and sometimes do not, so ask your agent what this particular bank's addendum says.

What is your rough read on after-repair value in that neighborhood right now?

Asset managers on REOs are almost never walking the property themselves. They order BPOs from agents who spend 20 minutes inside and comp on beds and baths. The 187k probably came from three sales within a mile that nobody crawled under.

What I'd counter at is 171 with your tile guy's photos attached, not 174 or 176. You want to anchor low enough that 178 feels like they won something.

The bank's pricing process on REOs almost always runs through a BPO, not a full walkthrough, and a broker doing a BPO is measuring rooms and noting condition in broad strokes. "Average" or "fair" on a BPO form does not capture a covered subfloor because the broker is not pulling up tile in a bathroom. So the 187k reflects comps adjusted for visible deferred maintenance, and your tile guy found the thing that sits exactly below the threshold of visible.

The decision you are actually making is between two structures, and they have different logic. You can submit an offer at 174k (187 minus your midpoint of 11k) and attach a written scope from your tile guy, which tells the asset manager there is documented moisture damage and you have priced it accordingly. Asset managers can accept documented re-trades more easily than blind lowballs because they need something to put in the file. The risk is that another buyer submits at 185k without knowing what is under the tile, and you lose the deal to someone who will discover your problem in month three. The other structure is to go in at or near ask, waive nothing, use your inspection period to get a structural engineer in for a joist assessment, and then re-trade with the engineer's written finding in hand. This works better when the bank has already had the property sit, because the asset manager's calculus shifts after 60 or 90 days on market. What is the current days-on-market on that listing?

The risk nobody is naming is that the bank's purchase agreement almost certainly has an AS-IS clause with a liability carve-out that runs right up to closing, and if your inspector's written report uses the word "concealment" or anything close to it, you may be handing the next buyer's attorney a document you paid for. Get that language reviewed before you decide what the inspection report says in writing.

On the number: 187k minus 13k in floor work gets you to a 174k effective cost before carrying costs, and that gap only matters if the comps the bank ran were clean, same-vintage houses with no deferred subfloor work. If they were, you have a real negotiating position. If the comps included other REOs from the same bank, the pricing may already reflect a neighborhood-wide discount that ate your 13k without telling you.

What does your tile guy think the joists look like on the ones he already opened up, and did any of those four end up with structural remediation above the 13k ceiling?

The inspection contingency is where this resolves, and the question is whether you have one and how many days remain on it. On a standard REO addendum the bank will push back hard on extending that window, so if your tile guy's read is correct you need a licensed inspector with a moisture meter in that subfloor before the contingency clock runs out, not after. A written inspection report naming wet joists and quantifying the spread gives you two things the bank's asset manager cannot easily dismiss: a repair estimate from a licensed contractor and a documented disclosure obligation that now sits on the record. If the bank counters at nothing, you walk and the report cost you maybe four hundred dollars. If they come down, you need the reduction to cover the 13k scenario, not the 9k scenario, because change orders on subfloor almost always land at the higher number once the demo is open.

The related piece that changes the picture here is AS-IS addendum language, which almost every REO uses. AS-IS does not waive your right to inspect and it does not waive the bank's disclosure obligation for known defects, but it does mean the bank can refuse any repair request and simply hold the price. That means your negotiation is binary: price reduction or termination. Given that your tile guy has seen this exact cover-up sequence on four houses of the same vintage in the same market, there is a reasonable argument that comparable REOs in Tucson are carrying the same hidden cost, which means the comps the asset manager ran to price this at 187k may themselves be distorted by the same deferred problem. That is worth raising with your agent as a comp adjustment argument, not as an emotional ask. What does your current purchase contract say about the inspection contingency deadline, and have you already submitted anything in writing to the listing agent about the subfloor concern?