bank owned property accepted a lower bid than mine

Asked by Shane, Scottsdale, AZ Thu Apr 23, 2009

why is it that i placed a bid on a bank owned home for 175k and did not get it accepted but the winning bid was for 156k which is what it closed for. the asking price was 150k. i jsut don't understand this. the only difference i see is that it seems that they had a conventional loan and i'm doing an fha loan.

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Mario Micheli, Agent, Cave Creek, AZ
Sun Jul 14, 2013
It is import that you have an advocate for your offer. Sellers ofter see FHA buyers as less likely to close. I have had offers accepted that were not the highest offer by selling my ability to close a deal to the listing agent (I have twenty-plus years of experience in a previous career as a transactional real estate lawyer and as a title insurance attorney) and explaining my buyer's seriousness and ability to survive the hiccups that can occur between loan pre-qualification, opening escrow and closing a new purchase transaction.

Please do not hesitate to contact me with any questions.

Mario Micheli
Nextage Realty Professionals
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Paul Welden, Agent, Scottsdale, AZ
Thu Apr 23, 2009
Hi Shane,

I've had this happen to one of my buyers.

The listed price was $157K and we bid $180K. Our offer was FHA financing and we lost to an offer that was at the listed price. The winning buyer was using conventional financing. FHA as a few more restrictions than conventional financing and most FHA borrowers are not as qualified as conventional borrowers. If I was a seller in this market, I would choose the buyer with the strongest possibility of closing the transaction.

Also, maybe the seller knew the property would not meet FHA's minimum living standards. Whatever the reason(s), you need to be working with an experienced, full-time Buyer's Agent. Just be careful of listing agents who are "moonlighting" as Buyer's Agents.

Buyer's Agent Realtor
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Laura Myers…, Agent, Scottsdale, AZ
Thu Apr 23, 2009
Oh, and by the way...don't forget the FHA 203k loan where you can make repairs to bank owned property by financing it in to the loan. So banks and should not fear the ability to close with a loan like this. All repair items can be financed by the buyer (must appraise at the repaired condition) so price must be written to account for what you see is wrong with the property and then when inspectoins are complete you may have to request additional credit for unknown defects. It is a lengthy process but a GREAT tool to buying distressed homes as an FHA buyer!
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Laura Myers…, Agent, Scottsdale, AZ
Thu Apr 23, 2009
Hi Shane
I have had buyers with higher offers declined as well. Most of my clients are FHA and we ask for the 3% contribution but if we are competing we roll the closing costs over what we feel is the highest offers out there so the banks bottom line isn't affected.

The other factor others don't take in to consideration and I wish it wouldn't happen but it happened to us in this case...the buyer that beat us out was the listing agents client as well. They pushed their deal through and we can't confirm bank ever saw our offer. Our offer was $3k over asking and it sold for $20k under asking. A big deal to the banks bottom line.

I have to call on every home I prepare to show even if it shows active and "interview" the listing agent. Some out there are forgetting our code of ethics.

Also, there are multiple offers on every home at your price point in many areas. For example in Buckeye and other more hard hit areas there are an average of 6 buyers per available property!

Keep in mind the moratoreum on foreclosures has lifted and while banks are doing more to keep people in their homes there will be more coming on the market and you will get a home that can be yours.

The key is identifying who you are dealing with on the other side of your transaction, getting to know how they work, and prepare them for you offer (quickly these days as they don't sit long if they are good deals) and have a cover letter that bullets the bottom line to the bank so no one has to figure anything out! Simple and basic, clean and quick are the ways to go.

Best of luck Shane. You will get what you want

Laura Myers
Keller Williams Arizona Realty
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David - Appr…, , Maricopa, AZ
Thu Apr 23, 2009
Going FHA could also be the a factor. Bank owned homes are sold "as is" and with the stricter guidelines of FHA, any repairs noted and/or needed along with other recommended inspections from the appraiser and home inspector, banks are not willing to pay for such. Therefore an FHA loan offer or bid may not be accepted regardless of the amount simply because the property may not pass FHA inspection.
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Phyllis JC A…, Agent, Phoenix, AZ
Thu Apr 23, 2009
There's more questions to ask.
Were you asking the bank to pay your closing costs?
Did you have proof of 3.5% downpayment?
Did you ask the bank to pay for a home warranty?
What is your credit score?
All these questions and answers are taken into consideration when the bank chooses a offer over another, even if the offering price is lower.
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