There is no way to predict the out come of banking logic. What seems rational and clear may end up wild and unpredictable. Banks are not interested in taking additional risk when it comes to distressed property. We have had a number of pre-approved financed offers on bank owned property turned down for lesser amounts as cash offers. This does seem to be the trend....regardless of the net gain or loss!
There seems to be a serious shortage of common sense and good business practice...
Or... perhaps the first offer beat you to it. Many sellers and agents will sign a contract with a buyer and not submit any subsequent (even significantly higher) offers.
It all depends on what kind of numbers you are talking about (is this a $200k house or a $2m house..), but the banks want to close the deal and get on their way. If they see road blocks (like financing) in their way they might easily be willing to take a deal $40k less to do so. I've see private sellers do the same.
Each short sale transaction is uinque ~ terms lenders accept vary and can depend on many factors.
Perhaps in the scenario you mentioned, the lender wanted to have a quicker closing.
It doesn't matter to the bank whether a buyer purchases with cash or is financing. If financing is approved, it's as good as cash. It comes down to how much of a loss the bank is willing to take. Typically short sales are priced lower to attract buyers but the bank may not even agree to a full price offer. The bank will get their own BPO (broker price opinion) or appraisal when an offer is submitted. They'll crunch their numbers, do their diligence, and either accept the offer price or counter it with a higher price. It depends on the bank, the amount of the mortgage, and the amount the bank is willing to forfeit. That's the long answer. I hope this answers your question to your satisfaction.
Michael Saunders & Company
110 Nokomis Avenue North
Venice, FL 34285