Why don’t banks always accept the highest bid on foreclosures and REOs?
Some investors in some parts of the country have recently been complaining about bidding wars over REOs and other distressed properties, so why is it that the highest offer isn’t always the winning one?
It may seem odd but it happens all the time. Some real estate investors have even recently reported their purchase offers were denied and that Fannie Mae went onto reduce the asking price for the property and left it on the market, despite having claimed a multiple bidding war situation. Why does this happen?
4 Reasons Your ‘Highest & Best’ Offer Doesn’t Always Bag the Deal
1. The Seller Was Lying
Fabricating stories of multiple offer situations to boost up offers isn’t a new phenomenon by any means, it has gone on for decades or perhaps since the beginning of sales. So don’t bid more than you feel comfortable or be forced into overpaying for buying a foreclosure home.
If you are a real estate agent or are using one and bring a full price offer on the terms requested you could try to sue, at least for the agent’s commission, though while this may work on regular sellers, it may be futile against big banks or the government.
2. It’s about Net Income
The most important piece of paper is the seller’s ‘Net Sheet’, with the most important figure being how much the seller will net, not your top line offer price. Closing costs and commissions can dig into this number.
3. The Paperwork isn’t Right
Banks and their processing staff are ridiculously ‘precise’ to put it nicely. If your short sale paperwork or offer on a foreclosure isn’t in exactly the format they are looking for they’ll toss it whether because they just want to be snobby or the minimum wage, poorly trained processor who doesn’t care and gets paid anyway doesn’t know how to use common sense to process it.
4. The Best Buyer Not Offer Wins
Sometimes the winning bid for foreclosures has nothing to do with the price and everything to do with the buyer. The strongest buyer that presents the easiest contract is often preferred over price. However, this sometimes can be due to an agent wanting their own buyer to win so that they can make more commission.
