But it sounds like everything was done legally.
You cannot get emotional about it.
A lot of people are still waiting for the BOTTOM of the martket; a lot of people have stopped waiting.
Don't take it personally. Sometimes things can get nasty. At the end of the day buyers and sellers have individual interests. Good luck in your future home search!
I'm afraid that Walter's answer is probably what happened. Like Walter indicated I would bet that it was a counter offer situation as is common with a lot of these types of properties. The accepted offer may have been higher or had better terms than yours. Steve Rugg is well known in the IE and I'm confident he does everything by the book, but if you are concerned that things weren't done correctly, then have your agent dig in a little deeper to see what happened so you can have peace of mind.
Best of luck to you.
First, I am sorry your offer did not get accepted. It is very common today to ask the buyer to cross qualify with a lender of the seller's choice especially with REO properties. Many will not even consider your offer without it. With regards to the counter offer they sent you, a couple of things come to mind. First, was the multiple counter offer box checked. If it was, the seller can chose any counter offer returned to them, regardless of the terms. If the multiple counter box was not checked, your counter would need to have been CONFIRMED RECEIVED by the seller or their agent in order to have a deal. Simply sending it does not mean they received it prior to accepting another offer. Hope that helps.
Sometimes things look one way but actually are another. I would suggest contacting the agent's Broker or the owner of the agency to ask them to look into how the deal was handled. This may help to ease your mind. Good luck