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.
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.
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.
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
You can always question the comps that the appraiser used - especially if they are an out of town appraiser. Generally, bank are very careful about the list price. They have an appraisal and sometimes 2-3 broker price opinions to support the price. They won't list for more than it's worth because many people have to obtain financing and they know they will run into appraisal issues.
With many of the banks that I have worked for, they started rejecting offers that were way over asking price for this very reason. They know it won't appraise and many agents started using this strategy to snag the property in a multiple offer situation and then ask for a price reduction later. Accordingly, if the bank *did* accept a well above asking offer, they included an addendum to the sale that if it did not appraise the buyer was responsible for the difference.
A house is worth what someone will pay for it. Many people may chime in and ask why you would "over pay," but it may the perfect home for you and your family - a long term investment. If you were going to stay a short while or flip the property, I would advice against it as values may be down for some time. If it is your home, however, and it fits everything you are looking for in a home, it may be worth it to *you* to come up with the difference.
Bottom line is it is not illegal for the seller to cancel the contract if you cannot purchase the property at the price you agreed to -$190k. They don't care where the money comes from - your bank account or via your loan. If you didn't sign an addendum stating responsibility for the difference in appraisal price, try to renegotiate. I would also find out about the appraisers territory, comps used, etc. Your agent can also review comps to make sure your offer price is in line for financing.
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.
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.
This is what I did and got the house for 6% lower than my offer at the short sale.