REO Bank vs. Selling Agent - who has authority to choose buyer?

Asked by Bruce, Chicago, IL Thu Dec 18, 2008

Does a local agent selling REO property for a Bank transfer all paperwork to them when there are buyers??

My logic says that the REO banks give their selling agents the authority to choose a buyer... especially in cases with banks as large as Fannie Mae.

Help the community by answering this question:

+ web reference
Web reference:


Paul Garver, Other Pro, Hinsdale, IL
Thu Dec 18, 2008

Good question. I am a real estate Attorney in the Chicago area and I have dealt with alot of REO transactions and the banks holding them (mainly as a buyer's attorney and in some instances representing the bank itself as the Seller's attorney) and there is one thing I now know... you can throw logic out the window.

OK, maybe that is a little harsh but you get my drift. The problem is that every bank handles this differently, and even the same bank will have different divisions that handle these differently. For example, lets say bank CW for example ... ahem... has a property that they foreclosed on that was a residential property with a residential loan, and sitting right next to it is a property that they foreclosed on that was owned by a builder, and was financed with a construction loan. These two properties will actually be handled by completely different offices of bank CW... perhaps one office in CA and the other in TX, with completely different procedures on how they handle these files and transactions.

My experience tells me that the normal procedure (even though there is no "normal" anymore) is that a loss mitigation specialist or property manager (depending on what the bank calls them) will make the decision on which contract to go with, and the realtor is ethically bound to present all offers presented to them. It usually takes a while for the bank to decide which contract to take (I have had clients wait up to two weeks to get back a signed contract), but most often they get some indication from the bank's realtor that their contract is the one that bank is going with. As I have mentioned in my other posts though, don't be suprised if the bank goes with another contract if in that waiting period to have a contract signed they are presented with a higher priced offer.

Hope that helps. Feel free to call me with any questions 630-789-6833 or email me at

Good luck,

Paul Garver
Web Reference:
3 votes
Christopher…, Agent, Chicago, IL
Fri Jan 9, 2009
Dear Bruce,

I have to agree with most of the posts on this forum. To answer your specific questions, typically the REO bank is the decision maker with respect to which buyer or offer will be accepted. The agent acts simply as that- a broker and facilitator to the transaction. The client and owner of the property is the bank. The paperwork is almost always forwarded to the bank's appropriate department for contract acceptance and handling.

And while most banks are getting a slightly better about their response times with respect to offers on their REO properties, many banks still take an inordinate amount of time to respond. I know folks who have had to wait for up to 12 weeks (unusual but possible) for a response to their offers. Most bank's REO departments were overwhelmed and understaffed at the time that the number of short sales and foreclosures began to accelerate rapidly, and most have started to get their staffing levels more in line with the new demands and volume of financially distressed properties. A long way to say that you should get a relatively timely response to your offers, but don't be surprised if you do have to wait for quite a while for a response.

Don't fall in love with any REO. There will be plenty of others that will come along if you miss out on one. Be patient and follow up with the REO banks about your offers once you've turned them in.

Christopher Thomas
Broker Associate, Sudler Sotheby's International Realty
773-418-0640 (cell)
Web Reference:
0 votes
Wayne Beals, Agent, Chicago, IL
Mon Dec 22, 2008
Hey Bruce,

Agreed with Dp2.

It is unethical for an agent to not present offers to their seller, regardless if the seller is the bank, the government, or an individual.

You will find that buying short sales and REO's requires patience. I'm sure this will change, as many of my short sales deals where the lender has taken too much time to respond, have missed out on better offers. They will get it together eventually because they're loosing money.

Plain and simple. If you put your best offer in, and are patient, you're likely to get the deal. Things that help your offer compete: Cash, Strong Earnest Money, Removal of Contingencies, etc. You write the offer you are comfortable with and if you don't get it, you're not stretching too far.

Get a good buyers agent who is familiar with the process, has market experience and is diligent. You'll get the best results this way.
0 votes
Dp2, , Virginia
Sun Dec 21, 2008
You're probably starting to see as Paul mentioned earlier there's no standard set of practices when dealing with REOs--except the fact that the banks will always go for the offer with the most cash and least terms.

Actually, I've heard information from realtors that back Scott's and Jeff's statements about compensation for listing agents. It's interesting that Paul mentioned most of his clients get a response back from banks within roughly 2 weeks in his area. I know in other areas it takes some banks several weeks to a month or so to get back to potential buyers.

Listing agent are supposed to present all offers; yet, I've run into a few who refused to put in a few of my offers. One in particular proceeded to try to "school" me on the offer making process. Although I could have forced the issue, I opted to move on to other opportunities--only to learn months later on that he ended up presenting another offer with similar price (and I suspect similar terms) which the bank accepted. I hope he had a dollop of raspberry sherbet to go with his slice of humble pie.

Anyway, don't worry about what the listing agent will do. Simply present your offer, and expect the bank to accept your offer, counter, or remain silent.
0 votes
Andrew, , San Jose, CA
Sun Dec 21, 2008
With every REO I have been involved with the bank makes the decision. I have noticed that in some transactions the agent does have some influence over the decision. What I mean is that the listing agents can and often do relay extra information about the buyers to the lender. How much influence they have seems to vary quite a bit between transactions.
0 votes
Scott Newman, Agent, Chicago, IL
Fri Dec 19, 2008
What listing agents do you know that are getting paid 1% to list these properties? Every major asset manager out there offers 3% with a 20-30% referral fee paid to them after closing for sending the business your way. In fact, I've never even heard of a single bank that expects their agents to work for so little especially since they're expected to shell out up front for transfer stamps, trash outs, and board ups. Let's be a little more careful and only post information that factually depicts the REO industry. There's enough confusion out there already!!!

In terms of who chooses the buyer- it depends on the agent. Those with a lot of experience have their opinion counted much more than those who don't. Having an agent personally vouch for the buyer can also change things quite a bit. At the end of the day, and officially speaking, the bank ALWAYS makes the final call on who's offer gets accepted.
0 votes
Jeffrey Kropp, Agent, Chicago, IL
Fri Dec 19, 2008
Bruce, I have a lot of experience with REOs since I own one, and also have helped my buyer clients purchase them. The bank chooses the buyers, that is why it often takes a long time to get a response. The listing agent presents all offers as they are always required to do, and then it sits on someone's desk for a while, in a loss mitigation department for a while. Keep in mind a few things. Listing agents are often paid a fraction of their normal commission to list these, maybe 1% of the sale price. That means they are not going to spend a lot of time dealing with different buyers and really getting involved much in the process. Secondly, the banks are starting to sell the homes directly to the public. These homes are not on the MLS. I work with a lender that sells their own REOs using signs with 800 numbers. When someone calls the number for access, they call me to help (I send loans to them as a loan officer). So if you are pursuing these, try to find a good buyer agent that is also a loan officer. Good luck!
Web Reference:
0 votes
Search Advice
Ask our community a question

Email me when…

Learn more