I'm in the same position. But to answer a question posed "why would you pay more for a home than what the asking is?" We offered $14,000 above asking for a home and at that time there was no other offers. We loved the home.
But with our situation which is ongoing is we cant get a signed contract. We keep agreeing and signing the addendum the bank requests without negotiation, giving them everything they are wanting and two months later we're still waiting. Here in California with the price of homes still falling (some we've looked at are now $80,000 below their original asking) I can't see why this bank hasn't jumped on a sure deal. Very confusing.

you can only get a loan for the appraisal value??? Why would you want to pay more than it's worth??? I guess if you really love it and have the cash, go for it. But, if they take it to auction, you will probably buy it for less. To answer your question, if you can execute on the contract, the bank must also.

Question to you is; Do You Have the Difference to Pay ?

I'm confused why you overbid on the property ?

Were there other buyers you were competing against ?

The bank deserves to take it back if they are refuse to accept
a $165k offer.

When you talk about the seller and that they bank may take the property back and auction it, the property does not sound like a REO (aka bank owned property). It sounds more like a short sale or a pre-foreclosure type sale. If this is true, your offer HAS NOT been accepted if the homeowner approved it and the bank has not. With the appraisal being so much lower than your offer, I'd say that you should WITHDRAW your current offer. Then you need to decide if the house is worth waiting for. You could try submitting a new offer, but your best bet is to wait until the property returns to the market as a true REO. You should be able to get the home at a better price.
This is what I did and got the house for 6% lower than my offer at the short sale.
Good Luck!

Why would someone want to pay twenty something thousand more for the property when it was appraised for so much less. Question of the pros.
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Because they want it and they think it's something other people will want also. Why would someone pay more than list price for a new car? They do in some instances.

I saw this great article explaining REO's and how to get the best deals here http://www.crystalclearmarket.com/?p=181

It teaches you what an REO is and how to get the best deals.

Hope this helps. Good luck to you.

Elliot Lau, Realtor of 22 years.

Why would someone want to pay twenty something thousand more for the property when it was appraised for so much less. Question of the pros.

Yes, the bank can do that. They are the final decision maker.

You said this is bank-owned. So presumably, you are negotiating with the lender (as the Seller), right?

The listing agent can appeal to the negotiator to postpone selling the property at auction if they can show the strength of your offer. If the property is appraised for $165K --- could you amend that offer to be at that price, or were you trying to get credits back for closing costs, etc when you wrote an offer for more?

I am also wondering what it was that you were negotiating with the seller/lender. Sounds like this "negotiation" as well as the higher offer-than list may have actually delayed the process for your offer to be accepted by the lender.

If you are unable to complete this purchase, consider it a lesson learned. When dealing with REOs, keep it simple, make it easy to process, no credits, AS IS.

Hi Mylinh,
Without seeing all the documents it is impossible to say for sure. It sounds like you have a deal at $190,000. The bank is only going to lend you an amount based on their appraisal of $165,000. As long as you have the cash to make up the difference you should be able to do the deal. If you don't have the cash and withdraw your offer and try to redo the purchase at a lower price the seller (bank) has the right to walk away. I hope this helps. Good luck, Walter

On a bank-owned property the bank can essentially do what they want. Your signed documents are between you and the seller, not between you and the bank. Anything you and the seller sign is dependent upon bank approval. Unfortunately, lenders can make the short sale process a bit of a nightmare. You'd think they'd want to get the property off their books, but sometimes it doesn't appear that way.