I do BPOs (broker price opinions) constantly. And yes, the bank absolutely asks for BPO's on short sales to verify current market values in a rapidly changing market. All banks are looking for current market value and yes, they may counter-offer any offers they get. I know this from personal experience.
Attorneys and realtors who treat the short sale situation the same way as a regular purchase need CLE or CE classes.
A short sale is not a deal until the lender says it's a deal.
So if someone has you sign a "contract" prior to lender approval the contract is absolutely useless until such time as the lender see fit. And they can always kill the deal up until and EVEN AFTER closing. That's right the lender can REJECT the payoff and leave their mortgage / lien on the property AFTER closing.
So my advice is:
Only negotiate a short sale through parties who have experience doing it.
Never give a deposit until the lender has accpeted your offer.
Only enter into a contract after the lender has accepted your offer.
Be ready to wait months until the offer is finally accepted
Make absolutely certain that the closing agent, title company, and attorneys know what they are doing so that you do not have any post closing issues.
As for the old "other offers" sales tactic - move on - their are PLENTY of these out there. No need to haggle over a deal that isn't even real yet!
You can also go to http://www.tomsresource.com/short-sales/
Reread all of the comments these real estate pros have taken the time to offer you and follow them.
For additional details and further questions, please visit us
at http://www.sonniacarbone.com Tel. 914-285-1452 or Cell 914-318-0228
Welcome to the world of "short sales."
If this is THE one, and you REALLY, REALLY have to this home, play the game and give it your best offer. On the other hand, if you have doubt.....doubt about integrity, if the home is worth the effort or money, about the bank etc. etc. walk away and test the water elsewhere.
There are many other opportunities out there and quite possibly one that will surpass this one.
You see what I'm getting at? It's not important which bidder got initial contract. What's important is that all three bidders stay in touch with the listing agent and act promptly when counteroffer is received from the bank. THERE IS NO NEED TO INCREASE YOUR OFFER until you hear a counteroffer from the bank. Tell the listing agent that you may increase your offer ONLY AFTER you hear the counteroffer from the bank.
They look at the package to see what the net is to the bank. If it falls within the guidelines of what the banks investors allow, they will proceed with an appraisal or minimally a broker price opinion.
Most banks require that a person go to contract in order to get an answer. When you state that there are 3 offers, did they go to contract? Short sales can be worth the time and effort, if you have it!
Ask him/her to provide you with a comparative market analysis on the property - a good one, that may suggest (as close as possible) to the appraised value of the property (very important).