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Understanding the Bidding War with a REO

Understanding the Bidding War with a REOThat Great Home

The recent experience of a bidding war with a bank owned property (REO) has brought to my attention the fact that as much as we write about short sales, forecloures, and bank owned properties, we're just not getting the word out to our clients.

With that in mind, here are some important facts that we need to know; that we need to pass along to our buyers; that the general public needs to know prior to becoming involved with a REO purchase.

  1. Writng an offer on a property with your Realtor(r) does not constitute a contract! You must have signatures from both the seller and the buyer on the contract for it to be binding.
  2. A verbal counter offer is excellent to have, but not binding. It must be followed up with that all important contract, signed by both parties.
  3. Very Important: Until the bank returns your offer with their counter, and they will always counter using their documents, you are not under contract, and
  4. They have the right to accept any other offer that is submitted

And this is how the bidding war begins. The bank is now holding two offers, that are just about identical, which is just a coincidence, we hope. They can't decide which one to accept, so they issue a "Highest and Best" request.

"Highest and Best" request is a one-time shot for you to obtain this property. So, give it your best offer. Here's what you need to do:

  1. Clean up your offer by
    b. Removing all seller concessions
    c. Tightening up your closing date
    d. Changing your finanacing to conventional, (it's easier to fund)
    e. And bringing your very best monetary offer
  2. Then, wait to hear back from the bank

If you have done everything in your power to make your bid your "Highest and Best," you might just get the home! However, if your offer was beaten by another, it's sad to say, but your desire for the home just wasn't as great as the desire of the other party.

 Here's cute little video about the bank owned purchase process...

 

 

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Marianne Snygg, GRI, ABR, ASP
Broker Associate
ERA Herman Group Real Estate

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Colorado Springs and Monument Real Estate

Comment balloon 3 commentsMarianne Snygg • October 16 2009 10:54AM

Comments

REO properties are the only ones attracting multiple offers in our market. I try to explain to potential buyers that the "winning bid" will almost always end up over "asking price", but Buyers keep insisting that this is a "Buyers Market", and so, they should be able to purchase these homes for far less than "ask". It takes a few failed-attempts before they realize that I'm giving them good information.
Posted by Tom Boos, Providing the very best of service to Sellers and (Sine & Monaghan Realtors, Real Living) almost 10 years ago

Marianne, I just had a client make a very decent offer (over the list price with no concessions) but did not get the home.  It happens but that's all part of it. 

Posted by Marchel Peterson, Spring TX Real Estate E-Pro (Results Realty) almost 10 years ago

I agree with you, Tom. I'm hearing more and more about "bargain" properties going for more than asking price. In someways, this is good, as it will raise the CMA for the other neighborhood properties, whereas lately, they've been pulled down by those properties. Let's keep our fingers crossed! Thanks for stopping by.

Yes, Marchel, I'm hearning more and more about that. I guess this is the signal that we are returning to a more normal market. As these affordable homes are snapped up, what's left are the homes that have not seen action lately, and we can only hope that there will be some movement in them. I hope, I hope, I hope. Thanks so much for checking in with my blog.

Posted by Marianne Snygg, ABR, ASP, GRI, SFR (ERA Herman Group Real Estate) almost 10 years ago

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