I am sure that the person who submitted the question below will have made a decision before they have a chance to get my answer. In any case, the answer could be helpful to anyone who has or might write an offer on an REO property so I am including it on the website.
Q. My wife and I wrote an offer a week ago on a
bank-owned house and today our agent told us that the bank has another offer in addition to ours and gave us an opportunity to change the offer if we want to and give them our ‘
highest and best’ offer by 5 p.m. tomorrow. Is this common? How should we respond?
A. First, just as a point of clarity, we are talking about a fairly common practice when you are trying to purchase an
REO (real estate owned) property. The process of purchasing such a property is significantly different. The guarantor or lender who is selling such a property is interested ONLY in the highest net dollar amount. One way to increase the net is to encourage competing buyers to make offers on the same property (creating a
multiple offer situation). Once the agent who represents such a seller is holding more than one offer, the strategy is then to have them compete against each other which results in a higher amount being offered for the home.
This process has rules. All potential buyers should be given the same time frame to respond and either increase their offer amount or re-affirm the amount they offered before is, in fact, their ‘highest and best’ offer. This option should be provided to the
buyer’s agent (via fax) and provide for a
signature so that the buyer’s agent can confirm that they have received the notification that the buyer needs to respond by a specific time.
The time frame for response varies but it is not uncommon for it to be 24-48 hours. A buyer has the option of withdrawing their offer if they decide they do not wish to participate in the bidding war. A buyer who is still interested and wants to increase their bid should be certain that their agent gets their revised offer in prior to the expiration of the required time frame. A follow-up phone call would be appropriate since the seller is going to make a decision based on the offers they receive during the stated response time.
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(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)
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