Hi Alana, as far as I know the bank will lend extra money. It depends on the bank too. You should get in contact with a good broker who deals with this sort of stuff day in day out. About 8 months ago I was considering buying a run down house worth about 100k and putting 40k into it. My broker told me it wasn't an issue getting the extra money included in the mortgage.
If a bank hold the deeds to the house as security and there is no loan then you are in a good position to get a good price. If the seller needs to get a personal loan for the difference between the mortgage and what you offer then you may run into problems.
Hopefully it's bos that are the bank involved as they are beginning to let property's go in a timely fashion.
Ask the estate agent who the bank/seller is and if there is any loans outstanding.