JEB, I feel for you and all the others that are trying to get a house in this market. I have clients in your same boat, hard working, good people, scrimped to save the down payment and the banks go for the cash. It will happen for you. Have you tried going for a short sale and making sure that the listing agent sends in only one offer, yours. This has worked! Talk to your agent and see what he/she thinks.

Jeb,
It's a shame that you and your family were beat out of your offer, but Ted hit the nail on the head. It's not necessarily the amount of the offer, but rather the strength and terms of the offer that matter most to the lender. Maybe you need to look at the presentation factor when bidding for a short sale or REO property.

JEB,

I have one listing with US Bank right now and Two with OCWEN. I've been listing REOs for just over a year now and I can tell you that they look at all offers and the first thing they look for is which offer has the highest chance of not bombing out of escrow. The order would be:

1. All Cash
2. More than 20% down
3. At Least 10% down conventional
4. FHA 10% down
5. FHA 5% down
6 FHA 3.5%
7. VA

The exception to the rule is, if the higher priority buyers give any indication that they could be a problem in escrow then the bank will move to another offer. Second, if your agent has a bad reputation for creating problems in escrow or a history of failed escrows, you will have another obstacle to getting acceptance.

I have beat out higher down payment offers with an FHA 5% down buyer, but I know what these asset managers are looking for. What has changed in the last 3 months is the shortage of inventory is bringing out some steep competition; not in price, but in strength of offer through higher down payments, all cash and conventional financing - that the low down payment buyers hare having a hard time dealing with. There are many other issues that have their pluses and minuses ..... asking for closing costs, termite, repairs, warranties and I see many buyer's agents cripple good offers by loading them down and making those buyers look needy compared to the competition.

I am not sure how your offer was "packaged" and what you asked for on your offer. See my article on how to make you REO offer more attractive and if you agent is not coaching you on these properties as in my outline then it is time for you start interviewing new agents. see http://budurl.com/pa7h

The good news is this inventory shortage will not last and when inventory returns to balance, another day of reckoning will make many a Realtor look stupid again. The housing recovery still has at least 3 more years; interest rates, tax credits, low inventory and pricing is driving the market, that formula can be upset very easily.

JEB,

We see this scenario all the time in real estate with Bank-Owned properties. I had an FHA Buyer that offered $381K on a property that was listed at $349K. The REO bank accepted another Buyer at $365K with 100K down.

If you contact me or other active agents, you may be able to identify an "off-market" pocket listing, and get it into escrow before it goes public. Otherwise, keep in mind "cash is king" since that type of Buyer can close quickly without a loan contingency. Your true competition is other FHA buyers, just like yourself, looking to take advantage of the incredible opportunity, which is now become a seller's market....

That's the hard part about buying real estate, or buying anything for that matter. Any time someone has cash to pay for something, they hold the power, because they can close quickly, and everyone involved can walk away from the home with win-win much faster than they can waiting for appraisals and lender approvals.

It's just life. The borrower becomes slave to the lender, and the cash buyer controls the market.

I think of it this way... It wasn't meant to be! You'll find another house! Possibly and even better one! Keep your chin up and let us know if we can help.

Ryan