Put an offer on a bank owned forclosure. Bank now wants me to us them for financing. What is going on?

I found a bank owned foreclosure in great shape and decided to put in an offer for the full asking price.

I am already pre-approved by a big bank. The foreclosure is owned by a shadow bank mortgage company (the seller).

Today the bank (the seller) told my real estate agent that told they would accept my offer but would want me to use their mortgage company for financing. My gut reaction is that this is a bad idea. I am already pre-approved through my own bank and I don't know what rates this new mortgage company will offer. And to make matters worse I feel like if I say no to their financing that they will decline my offer on the house. Is it weird that the seller and lender are the same entity? I get it, any money they lose by selling the forcelosure on the cheap will get recovered by collecting my interest. But it just seems fishy.

I feel like I have no leverage. This house has recently dropped in price and has peaked some interest, others will scoop up the house if I don't. My fear is that I'll get locked into some horrible rate or high closing costs. The bank (the seller) is waiting for me to respond at this point and I'm unsure on how to proceed. I really want this house but I don't want to get bent over a barrell either.

I am a first time homebuyer and can't find any information about this type of situation online. Anyone have any thoughts? Is this common? What are my options realistically?