Tis' frustrating. Dealing with REO's has great benefits but does take patience and persistence. Learn from this one, read all you can in the many forums relating to buying REO's and, try not to get frustrated. I had a similar situation recently but, I was the one with the client who purchased for less than other offers that were "higher". Although price offered by others was higher, their terms were not similar. Ours was a true pr-approved loan with no loan contingency (Buyer was truly pre-approved and could...and would pay cash if they had to AND had no appraisal contingency) the deposit was 10% of the selling price, our inspections had been done prior to offering (No inspection contingency) and no other conditions whatsoever. That being said, the other offers were not similar. A good majority of REO's that enter escrow do not close and lender-owners do not want to deal with re-marketing properties for any longer than they have to. Know what a lender wants to see before making an offer and you will increase your odds.
Did our ordeal stop there? Nope. An agent who thought their great offer went unseen, spent days contacting anyone and everyone they could (REO listing agents regularly employ others to field the hundreds of calls they receive and asset managers do not want to be dealing with agents directly). He contacted anyone that they could find connected to the property to lodge a complaint. When they finally found that their offer was not the best in the lender-owners eyes, the damage had been done. It delayed my clients transaction for 2 weeks (Not too big of a deal) but, more importantly, created quite a name for himself with some pretty large REO agents and asset managers. Do you think that this may cause an issue in the future? I suppose it could.
If you miss a great REO....move on and be better prepared the next time around. The lucky bird gets the worm!
(Luck is when preparation meets opportunity)