If you're still interested in the house, keep in mind that the higher offer may fall through.
I do short sales as well , what we basically do is if we know it is really a good deal and we know that the bank is going to agree , we take the risk and pay for all the inspections and stuff that has to be done in the property , but that doesnâ€™t warranty that the bank is going to pay you, remember the bank is taking a lost in the property when you do a short sale and if at the end of the day the short sale doesnâ€™t go well and they cannot close on the property the bank will not pay for those expenses.
That is my particular experience. Especially with second mortgages.
Do you love the home less at the new higher market price? Or did you only love it at the deal you were trying to get it for? If you do, why not try at the new market price? The seller may choose you for your perseverance and the fact that the inspections etc... are already done.
FOR ALL OTHERS: The only "sellers market" in america is the foreclosure market. Don't expect any deals from a foreclosure as the bidding process brings 20-30 people to bid on almost every deal. A deal that was already priced at market. For government foreclosed homes, by law, they have to be priced "at market".
The REO manager has a short list of "cash/close in 2 day buyers", they always get the first right to bid. Then they have to wait for the "public auction" Which drives up those prices. After a 30-60 day period. Then the REO picks the best bid. Sometimes, only sometimes does a REO manager take a property directly to a buyer he knows peronsally. Why should he, he has a bunch of people bidding and driving up the prices.
My REO manager friend likes to joke about all the "first timers" who continue to drive up the bid when they don't hear anything from the bank. Every time I see the "how come I haven't heard from the bank about accepting my foreclosure bid after 30+ days" on trulia, I have to let out a chuckle because he's so right. For those newbies, this is real. They know that when you don't hear from them that a large percentage of people drop a second or third offer higher than the previous one. **WARNING, YOU ARE BEING TAKEN ADVANTAGE OF HERE**
You want a deal on a property right, everyone wants that.... So the moral of this story is:
1. the 60 days you have to wait to hear from a REO, you could have made 2 or 3 better deals with a property that has been on the market for a long period of time. Any realtor can help you drop a crazy offer.
2. You are attempting to make a deal in a house covered in a cloud of bad energy, don't be surprised when it rubs off. Personally I stay away from these for this reason entirely.
3. One way to get a deal is dropping a hand written note on ANY house in a neighborhood you want to buy that says "my girlfriend and I want to buy a house in this neighborhood and yours looks cute from the outside. Do you know anyone that is looking to sell?" I always get responses, better prices and positive energy into the home.