Posted by: The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

66 responses to “REO Buyers: Beware of Multiple Offer Sudden Death”

  1. Ben

    http://en.wikipedia.org/wiki/Sealed_first-price_auction

    Seems like a reasonable way to do things without having a lot of paperwork and horsing about.

    Interesting that it has the same strategy as a Dutch auction.

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  2. ARDELL

    The normal term for that scenario is “Notice of Final and Best”. It was fairly common in the last recession for Relocation Properties. Some do not change their offer if their original offer WAS their Final and Best offer (basically known as the Trump method of buying.)

    The classic case was one where Buyer A got the property, but for $400,000 more. The glitch was that Buyer A and Buyer B had both hired Buyer Agents from the same Company. Buyer A sued the brokerage for submitting the higher offer for Buyer B that caused him to pay $400,000 more for the property. That was in San Francisco during a hot market. Standard forms have since been changed to allow a brokerage to represent two parties on the same house.

    The most common way for Buyer B to not pay $7,000 more than Buyer A is by using an Escalation Clause where you say, “I will pay X more than any other offer up to a cap price of X. In this case, let’s say Buyer B said I will be $500 more than any other offer up to a cap price of $197,000. At the end of the day he would have had to pay $190,500 instead of $197,000 even though his “cap was $197,000, as his “increment of increase” was $500 more than the other guy.

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  3. Kary L. Krismer

    Banks won’t typically allow escalation clauses.

    I find this extremely common, especially on the REOs that are in better condition.

    The other thing that gives rise to it is the banks’ practice of reducing price in large chunks. I’ve seen that can generate multiple offers even outside the REO area.

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  4. Kary L. Krismer

    RE: The Tim @ 3golly, Tim beat me.

    BTW, I should point out that the NWMLS escalation clause has no provisions in it that adequately provide for seller paid closing costs, and therefore I would not ever recommend using that form without having an attorney draft provisions that fix it. Otherwise you could end up paying even more than $500 or $1000 over what the competing offer was offering.

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  5. NewHomeOwnerInFremont

    When I started looking at REOs, I did not know about this until I made an offer. I initially placed an offer with an escalation clause on an REO property, but the bank, Fannie Mae in this case, said it does not deal with escalation clauses. The listing agent who was working with them said I was the only offer at that time but other potential buyers had called and said they were going to make an offer on the property. If that had happened, what you have written for this entry would have taken place. Luckily for me, none of the other buyers followed through on their word. I’d highly recommend not get into these bidding wars because a great deal will become a so-so deal or even not a great deal.

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  6. Steve

    Due to “bidder’s remorse” the “winner” is inevitably the one who overpaid the most.

    I guess you need to stay emotionally detached right up until the moment you have the keys in hand.

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  7. Bryan

    Not sure really how this differs from competing bids on a conventional property, except in the latter case you can enter an escalation clause.
    Either way – escalation clause or not – you can overpay for a property if your emotions hold sway and your best offer is higher than the max you (should have) set for yourself when making the initial offer.

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  8. David S

    When doing the REO dance:
    House lists for $475k
    House could be worth $550k
    House needs work of $200k
    I think offer of $350k is good
    House sells to other for $375
    I lost by $25k or did I just not loose $25k?
    http://www.redfin.com/WA/Maple-Valley/21117-276th-Ave-SE-98038/home/375093

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  9. Kary L. Krismer

    RE: David S @ 9 – Just out of curiosity, what comps were you using to determine that might be worth $550k?

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  10. David S

    RE: Kary L. Krismer @ 10 – I’m using: Redfin comp’s, Assessment, Zillow, and the ones provided by my agent, average price per square foot, the tides, phase of the moon, angle of inclination, you name it, multiple sources.

    I believe this one involved death of owner, family squabbling, estate settlements and ultimately default to foreclosure.

    My wife and I decided we were actually not too far off real market price after it sold when we found out for how much. Our 203c, (rehab loan) would have been too much additional expense for this property.

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  11. ;

    i would actually retract my offer in this situation.

    multi-bid situations always means you won’t get the best price – and i can wait for a better price.

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  12. Dan0

    RE: Steve @ 7

    “Beware” is a great term to include in the title of this blog. As Ben@1 noted, the banks are imposing a sealed-bid, first-price auction. Since real estate is an affiliated values environment (my value for the house is not purely for my own enjoyment, but also depends on the market), this situation is ripe for the “winner’s curse.” Ironically, IF everyone is wise to this problem, the banks will earn less expected revenue than they would if they allowed escalation clauses (imposing a second-price structure on the bidding). These clauses alleviate the problem of the winning bidder depending only on their own estimate of the value, which is likely an over-estimate, and allow for more aggressive bidding without fear of buyer’s remorse.

    http://en.wikipedia.org/wiki/Winner's_curse

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  13. T

    @12 Rather than retract the offer, I’d just hold firm with the original offer. If someone else is willing to over-pay, then that’s their problem.

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  14. Kary L. Krismer

    RE: T @ 14 – I would agree with that, and suggest that if everyone did that, this wouldn’t be a problem! ;-)

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  15. LA Relo

    We put an offer in on an REO, and were told there were higher offers by the listing agent, not the bank. At least not directly by the bank.

    We probably could have put in a higher offer, but I refuse to get into a bidding war in this market.

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  16. Andre

    I got overbid two times on REOs, once in 2008, once in 2009. Same type of deal as described above. I did not raise my offer above the initial price.
    I ended up buying in 2010 (auction), at a much better price.

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  17. Alan

    I would lower my offer instead of retracting it.

    I would also ask my agent if their brokerage was representing the other party. If so I would collude with the other party to get a lower price for one of us in exchange for a cash payment to the other.

    Example: My initial bid is $400k. Bank begins closed bid first price auction. I talk to party B and we agree to bid $350k and $360k respectively as long as B agrees to pay me $5k if he gets the house at $360k.

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  18. ARDELL

    RE: The Tim @ 3

    I have seen that and still done one and it has worked. I just saw one last night that said EM “must be” 3% of purchase price. But really that is just a “request” isn’t it? No forced compliance that I know of.

    Letting the seller dictate what a buyer can and cannot do should not necessarily be taken at face value. Why do people take a bank seller’s MUST differently than a private owner’s MUST?

    A buyer should do what they feel comfortable with and refuse to be dictated to. Yes, they live with the consequence. But if Buyer B put a $1,500 increment with a $197,000 cap, what excuse would the bank have of accepting the lower $190,000 vs $191,500? None that I know of. I high increment is still better than paying $7,000 too much.

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  19. ARDELL

    RE: Kary L. Krismer @ 5

    Depends on what you call “adequate”. I have not found it to be a problem in that regard. YMMV The form does provide for the math of “net” offer price, and I have seen it work well and without problem of any kind.

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  20. GreenAcres

    We went to sudden death on an REO last spring – this place:

    http://www.redfin.com/WA/Snohomish/4105-Newberg-Rd-98290/home/2452663

    The house had been unoccupied for a year, needed a new roof and other significant repairs (estimated at $60-100K). We loved the house, but the bank balked at repairing the roof and we withdrew our initial offer. After another month on the market, we made another offer and the bank agreed to repair the roof.

    Out of nowhere, there was another offer and we were asked to make our best and final offer. We stopped at $340K. It sold for $353K.After I walked away, I realized I had not only avoided over-paying but had dodged a remodelling/maintenance headache the size of Texas.

    I feel bad for the new owners. I hope they did their due diligence before purchasing. My husband works in the construction industry and even with him putting in a lot of sweat equity, we just couldn’t make the numbers work at much more than $325K. The house is not worth anywhere near the assessed value ($604K) in current condition. Even fully remodelled, it would be difficult to get more than $500K in that location, I’d guess.

    Looking back, I’m not sure why I went higher… blinders on, I guess. I loved the *idea* of living in that house – fully remodeled of course. What I wasn’t thinking about was the emotional and financial impact of the remodel… and of owning too much house, for too much money, in a terrible location.

    This January, we bought a much nicer home without any of the maintenance nightmares and much more space, for less than I would have been into that home for. Sometimes losing is “duh, WINNING!”

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  21. Ross

    If you get into a bidding war, just walk away. The other buyer may often walk too, if he hears you walked. There’s more houses out there and rarely is a house worth bidding over and overpaying.

    Also, I’m very suspicious of selling agents. They know how to create the false sense of scarcity by pretending there are multiple bidders (Would that be illegal to do?).

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  22. Lurker

    There is ALWAYS another interested party and listing agents are ALWAYS “expecting” another offer. Not that it isn’t sometimes true but it’s a great reason to find the number you can accept and then stick with it.

    We won big time last year in a bidding war – we stuck to our guns and someone else took it for more and it was one of the best thing to ever happen to us.

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  23. ray pepper

    Highest and Best is Fine! 3 x now different Buyers of mine were sent the message to submit “highest and best” by noon Friday. Each time all Buyers did NOT change their offers. 1 got the home. 1 got a response that ALL offers were rejected by the Bank. 1 lost out to a higher offer.

    At The Trustee Sales every Friday we lose out to higher bidders but PATIENCE is essential. Let someone else have it. Each and every Buyer I EVER represented was always so much happier that they waited and found their NEW GEM because prices just continued to spiral downward.

    Just found out from my “Trustee Connection” that the flood gates are being let open over the next 120 days with a tremendous amount of properties being released via Chase and to that I state…………….Its about time!!. Slim pickens week after week and far too many Buyers circulating the tents.

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  24. AlanFord

    He, he, there is nothing new there. Listing agents have been doing that shtick for long time already. I have encountered numerous situation where listing agent said they have higher offer and that we should submit our final offer. I always either hold or bail and more often than not these properties don’t close because there wasn’t any second offer… Banks doing it is just them learning the lesson. ;-)

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  25. S-Crow

    RE: GreenAcres @ 21 – I think you made a very good decision.

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  26. Kary L. Krismer

    By ARDELL @ 20:

    RE: Kary L. Krismer @ 5 -Depends on what you call “adequate”. I have not found it to be a problem in that regard. YMMV The form does provide for the math of “net” offer price, and I have seen it work well and without problem of any kind.

    My mistake. I wrote the forms people back in February, 2010, and the response I received made me think they had no interest in dealing with the problem. But the current form is 7/10 revision date, so it only took them 5 months to fix it. I hadn’t noticed that they’d updated the form.

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  27. Kary L. Krismer

    By GreenAcres @ 21:

    I feel bad for the new owners. I hope they did their due diligence before purchasing.

    You really do need to do due diligence before making the offer. I’ve been looking at a lot of REOs lately, and you find a lot of things if you look around. For example, one house the hot water lines were only connected to the kitchen sink and nothing else. Another the drain from the washing machine dumped down at an angle right into the electric water heater (which replaced a gas one for some reason–maybe the water was putting out the flame!). ;-)

    This time of year they’re almost all winterized, so if they have galvanized plumbing, you can’t determine flow issues prior to bidding.

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  28. GreenAcres

    RE: Kary L. Krismer @ 28 – This home needed:
    – a new roof (it was shake so it needed to be stripped, sheeted, replaced) – bank should have covered this IMO. But if the new owners didn’t require this, our estimates were $25K – $59K due to size of the place (ouch!)
    – the pool/spa needed about $30K in repairs/maintenance or about $25K to fill it in/pull out plumbing
    – There had been plumbing leaks – radiant heat had not been winterized, nor had some lines leading to kitchen.
    – The entire place was circa 1970… with pink carpet throughout and the last owners had removed a lot of cabinetry, lighting and plumbing before foreclosure. It wasn’t just cosmetics…

    The house originally sat on 18+ ac. but had been subdivided. The remaining lot was ~2 ac of concrete and driveway.

    I dunno. I loved that house for several months. I tried to make it work 3 ways to Sunday. And I’m ever so glad I “lost” the bidding war now!!

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  29. Markor

    By ; @ 12:

    i would actually retract my offer in this situation.

    Same here.

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  30. Kary L. Krismer

    By GreenAcres @ 29:

    – the pool/spa needed about $30K in repairs/maintenance or about $25K to fill it in/pull out plumbing

    $25k to fill in a pool? Not something I’ve ever done, but that seems high. I guess it would depend on access issues.

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  31. softwarengineer

    I Bought a House With Multiple Offers in 1999

    But it wasn’t a short sale or bank owned sale item, it was a regurly listed home. I wouldn’t have gotten the house either, but I pushed my realtor away from her desk, grabbed a pen and finished all the paperwork that afternoon. She helped me get $1000-2000 off my full price offer by not telling anyone I was a single middle aged engineer, as she inferred that I was a young kid with barely enough for the 20% down and couldn’t ante the closing costs too. They took my full price offer but only paid half the closing costs….LOL….my realtor did help me after all :-)

    Afterwards, another realtor was mad at me [he was President of the HOA board and lived in my HOA] for quickly moving paperwork and stealing the sale from him. He retaliated by reporting my unlicensed gas heater/stove to the State, which he knew about. I got the stove company to pay for the inspection and my realtor paid me too. My stove’s legal now too :-)

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  32. GreenAcres

    By Kary L. Krismer @ 31:

    By GreenAcres @ 29:
    – the pool/spa needed about $30K in repairs/maintenance or about $25K to fill it in/pull out plumbing

    $25k to fill in a pool? Not something I’ve ever done, but that seems high. I guess it would depend on access issues.

    Yes, pool had really limited access… concrete pond/waterfall/rockery on one side, house and garage wrapped around the other. The bid we got was from the guy that installed it… Apparently the install was tricky too…

    Anyways, good luck to the new owners and I hope they are more successful than I was in finding economical solutions to that home’s issues. :-)

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  33. Kary L. Krismer

    Tim, just wanted to say this is an excellent topic. It’s one people should know about that really doesn’t get mentioned much.

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  34. One Eyed Man

    Some agents go to a special class so they can put on their card that they’re a negotiation expert. I wonder if the instructor teaches them what a brilliant idea an escalation clause is?

    What would you do if you were a seller and you received an offer for 500K with an escalation clause that said the buyer would pay $1000 over any other offer up to 525? If a seller has sufficient risk tollerance, all the seller has to do is counter at the highest price the buyer listed in the escalation clause even if no other party responds to the last and best offer request. An escalation clause is like saying that you offer 500 but that you will really pay 525 (but don’t tell anybody, its a secret cause that’s my walk away price). If you’re the seller, you can accept the 500 or counter at 525 and risk that that buyer might walk. Do you want to risk it? Or do you want to accept 500? To paraphrase a Rockstar from Mars, if you’re a seller and some idiot provides the information in an escalation clause, the negotiation is over. You’re WINNING!

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  35. Kary L. Krismer

    RE: One Eyed Man @ 35 – I’ve never used one because of the concerns you mention, but last year I did have a client considering it, which is how I found the defect in the form. He changed his mind about using it, which I was glad about in part because I didn’t really want to draft language to fix the form.

    One other concern is how the use of such a form would affect the inspection process. It’s hard to ask for and receive a credit for defects when you’ve already indicated a willingness to pay more than the contract price.

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  36. Dan0

    RE: One Eyed Man @ 35

    It’s not usually a good idea to reveal private information without compensation; however, using an escalation clause can be a good idea in certain circumstances. For instance, we bid on a fixer with a phenomenal view of Lake Washington and Mt. Rainier. It was listed at 550K and comps put the market value of similar homes over 750K. The seller’s agent claimed to have an estimate of 200K for repairs. We did our own pre-inspection and came up with a 300K estimate. The seller expected multiple bids so we bid 450K with an escalation clause up to 553K. There were 5 bids, all of which used an escalation clause! The “winner” was apparently willing to bid up to 650K, but ended up buying it for only 555K (presumably our “second price” + a 2K increment).

    Since we expected multiple bids, the key reason to include the escalation clause was the uncertainty over repair costs. By using the escalation, we were able to effectively pool the information from our estimate with the information of the other bidders. As it turns out, the winning bid was made by a neighbor who would have lost their view if someone had just wanted the lot and planned to build up. Preventing this possibility was apparently worth 100K to them.

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  37. David Losh

    RE: Kary L. Krismer @ 34

    I agree this is an excellent topic.

    My question to any one is: if multiple offers were a bad idea when the Real Estate market was going up, are they now a better deal now that the market is deflating?

    Seriously, a buyer’s agent would need to get a release before writing a multiple offer deal indicating that the buyer is aware they may well be paying too much for a property. A buyer’s agent should warn a buyer that only the seller comes out ahead in this situation.

    If you have a buyer’s brokerage agreement then, if the property goes down in value, a buyer’s agent can refer to the disclosure they had the buyer sign.

    Yes, I am serious, this is a bad idea any way you look at it. Any time, in these past ten years, an agent has said, it’s a multiple offer, or there are other people interested, I have said, “fine, we can wait.”

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  38. hp

    We bought an REO in a multiple offer situation.

    Bank had listed the home for $460k with little interest at that price. Then they dropped the price down to $410k. We put an offer at $390k and they said they have one more offer. They even said it was less than $390k but they have to go into the multiple offer sudden death. They DID allow an escalation clause though. We bumped up the offer to $403k with escalation up to $421k (house was in good condition and easily worth $480k-500k). Now instead of showing us the other offer as per our escalation clause they “countered” our offer to $407k and we accepted. Not sure if I paid higher than I should have, but we were willing to pay the full price ($410k ) when we put our first offer and absolutely love the house. So I ended up saving $3k.

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  39. Rhonda Porter

    I have a client who lost out on a bidding war…they wound up “winning” the bidding the war at their price/terms when the original “winner” lost out since the offer was allowed to be in “back up” position.

    This post is good advice for ANY home buyer in ANY situation to try not to get emotionally attached… although it can be very hard advice to take. Most of my home purchases have been “emotional” and I’ve been lucky to have sold them at the times I have and with exception to my first home, I’ve never bought intending to re-sell quickly.

    I’ve been tempted to write about one of my transactions before I was in mortgage where the selling agent (“my” agent??) played some dope games that wound up being addressed by Elizabeth Rhodes…but I’m actually embarrassed that I fell for his games.

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  40. mukoh

    RE: ray pepper @ 24 – You are right about that. In my experience same thing. When the agent calls and says they want your highest and best. Just like yesterday on shoreline dirt was “THIS IS MY HIGHEST AND BEST”.

    Stick to your estimates, don’t let anyone bid you up. Do your DD before writing an offer.

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  41. Scotsman

    The whole idea of entering a bidding war for a depreciating asset boggles my little mind. That there are apparently many who consider this a timely and valuable topic twists what’s left of it into a little knot.

    I do, however, appreciate the hot sauce in the accompanying photo. I used to lunch at a place in Issaquah that had the most eclectic selection of sauces. One simply named “Pain” was popular. But my personal favorite was labled “Monica Lewinski’s.” It’s claim to fame was that it “brought you to your knees.” Oh yeah.

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  42. ray pepper

    Scotsman I cannot process that Spicy stuff anymore. I think I blew myself out with ordering too much 5 Star Thai meals over the years.

    Whenever I eat spicy I wake up with violent cramping, sweats, and images of Steve Tytler smiling at me over my bed:

    http://www.bestmortgage.com/

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  43. Jonness

    These days, a third of the supposedly pre-approved buyers can’t even get a loan. Do you really want to bid against these giddy idiots? Value the house with logic instead of emotions, and don’t get caught up in mindless carnival games.

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  44. Jonness

    By ray pepper @ 43:

    Whenever I eat spicy I wake up with violent cramping, sweats, and images of Steve Tytler smiling at me over my bed:

    And you only realize it’s a terrible nightmare when he shows you a price chart that proves his famous stair step theory. At that point, you realize what you are experiencing is completely impossible. :)

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  45. ARDELL

    RE: One Eyed Man @ 35

    I’m closing on one tomorrow where I used an escalation clause just in case another offer came in at the last second. Offer was written first day on market. The cap was over asking and the counter from the seller was under asking. Your logic makes sense, and I admit the client was concerned the seller would counter at the cap. But often it’s not what’s on the paper that wins, but the way it is presented.

    This was a hard to duplicate house in an area where most homes are much more or much less. Finding another house as nice in the price range was unlikely. The odds of finding another have to be considered as part of the offer strategy.

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  46. Conor macEvilly

    I’ve been in that situation representing a buyer on an REO purchase, but we did get the bank to pay for a new sewer line and do electrical panel upgrades to bring to code.
    Always a possibility that the bank may not have any other offers and is just trying to put the frighteners on you to extract every last penny they can.

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  47. WaterView

    Long time lurker, but I wanted to say that this scenario just happened to us. We put in an offer on a bank owned property the day they dropped the price to what we felt was a good deal for the shape of the home. It had no offers then apparently within 24 hrs of dropping the price they had multiple. Our final and best offer was $100 more than our initial offer, I am not willing to play a bid up game when there are so many properties on the market.

    In the end…we got it. So now if everything holds together until closing we will have a place that is 600 sq ft larger than our rental, on a lot that is 5k sq ft larger (im a gardener), and the mortgage payment(with taxes and ins) is equal to our rental price. This blog has been a great source of info for me over the last 5 years I have been reading it, thanks Tim!

    Our purchase price was 55% of the 2007 sale price.

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  48. astrokermit

    Grats with you purchase WaterView! How much did you put down and which neighborhood? Do you think the last minute multiple offers was artificially created?

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  49. Kary L. Krismer

    What I find interesting is that the Fannie Mae Multiple Offer Notification From has three choices, in the following order: (1) Buyer is backing out; (2) Buyer is staying put with existing offer; and (3) Buyer is making a new offer. Rather obviously they realize that three things could occur and that one of them is bad for them. It sort of makes me wonder how worthwhile this is for them–how often does the higher priced offer back out? It’s not like they have to go through this process. They could just accept the higher offer.

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  50. Bob

    Speaking of REO’s, It seems that the banks are resorting to auctions.
    This house went for 1.6 million a couple years back. Now the reserve will be 399K. http://www.auction.com/Washington/residential-auction-asset/1245985-1225-20-Cherry-Loop-SHORELINE-WA-98133.html#;

    The mention the 25K joining bonus and the 39K a year in assessments for the neighborhood in the attached PDFs.

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  51. Kevin Lisota

    RE: AlanFord @ 25 – Having listed properties for banks before and encountered this many, many times, it is definitely not a “shtick” or ploy. If the bank calls for “highest and best offers” in a multiple offer situation, they do have multiple offers. All of the offers get uploaded into websites, which triggers the multiple offer situation with the bank.

    Whether you want to get into bidding wars is a buyer decision. Personally I think it sometimes makes sense and sometimes does not. On bank properties, I have seen some crazy low pricing strategies by the banks to elicit multiple offers and make it sell instantly. I just did one where they were listed at $650, which was a pretty typical fair market value for that sort of home and neighborhood. After 60 days, suddenly they dropped to $500k. Of course it sold instantly and got bid way up. Even at $600k, which was $100k over their final list, it was still a good deal relative to the neighborhood, which is I’m sure about where it ended up.

    I’ve seen other situations where the list price wasn’t that attractive, however, and seen buyers get caught up in the bidding for a particular location or the perception that it must be a good deal if a REO.

    Bottom line, sometimes competing is worthwhile and other times it is not. Have to judge it on a case-by-case basis with bank-owned properties.

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  52. ray pepper

    RE: WaterView @ 48

    Great Job Water!

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  53. WaterView

    RE: astrokermit @ 49
    I thought they fabricated the other offers, but I have no proof of that. It could be that others were lurking in the wings watching the property and waiting for the price to drop and jumped like we did. The listing agency has not been the most forward with information or help.

    We wanted to live down in the renton area, and ended up finding a house in lake ridge. The home is surrounded by nice homes, has a view of lake washington, and the lot is super sunny for my gardening adventures. The home needs new electrical, but the roof and heating system are both brand new. The inspector found the house to be in good shape with no structural problems.

    We did a convential 30 year loan, with 20% down.

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  54. softwarengineer

    RE: Jonness @ 44

    Very True

    During the small Seattle Bubble of the late 80s I’d see decrepit HUD Homes selling for horrifyingly high bids….like you said, unintelligent and naive folks with pipe dream cash to burn, until their loan offer is rejected and the same HUD Home back on the over-priced bidding table of fools again.

    Isn’t that something like throwing dirty underwear at a wall until it sticks….LOL

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  55. Ross

    By Bob @ 51:

    Speaking of REO’s, It seems that the banks are resorting to auctions.
    This house went for 1.6 million a couple years back. Now the reserve will be 399K. http://www.auction.com/Washington/residential-auction-asset/1245985-1225-20-Cherry-Loop-SHORELINE-WA-98133.html#;

    The mention the 25K joining bonus and the 39K a year in assessments for the neighborhood in the attached PDFs.

    Auction.com is a bit of a scam. Many of the options are sold “subject to seller approval”, which basically means you’re bidding to put in the highest offer. The terms are extremely one-sided, require 5% earnest money, and the bank can accept a higher offer at any time. (I “won” the house I’m living in now at such an auction, but the seller renegged on our auction bid, and instead put it back on MLS … where we eventually achieved mutual acceptance).

    So point is, $399K is _not_ representative of what the bank wants or thinks they can get for the property. It is a marketing number designed to lure you to the auction.

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  56. Kary L. Krismer

    I just came across a new bank owned term–probably agent driven. They want the buyer to have a licensed plumber de-winterize prior to inspection and then re-winterize the property at their own expense. Typically that’s done by the seller. Not only would that cost the buyer probably at least $200, but if anything happens between the water being turned on and the inspection, it could arguably be their liability (at least the bank could try to make that claim). Then if anything did end up freeze damaged after, it would arguably be their liability too. All just to make an offer and inspect a house.

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  57. Macro Investor

    By Kary L. Krismer @ 31:

    By GreenAcres @ 29:
    – the pool/spa needed about $30K in repairs/maintenance or about $25K to fill it in/pull out plumbing

    $25k to fill in a pool? Not something I’ve ever done, but that seems high. I guess it would depend on access issues.

    Used shovels cost almost nothing. Dirt is easy to find free. A little hard work has health benefits. Total cost… a bag of grass seed when it’s covered.

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  58. Dowell Taggart Team

    I had 1 buyer lose 6 homes to the REO game of “Best and Final”, Four of the homes flipped but my buyer had already moved on. My buyer gave up and bought a lovely home in great condition from a couple relocating out of the city.

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  59. Seattle Bubble • Knife-Catcher: The Tim’s Home Search Timeline

    [...] inspection.Winter 2010-2011Made offers on three other bank-owned homes.Lost two of three offers in multiple offer sudden death.Bank had already accepted an offer on the third home (even though it wasn’t [...]

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  60. rojer

    About to be in this game I suspect. Made an offer on the 2nd day it was listed and nada from the REO agent except that someone is on vacation (lies) and will be back to us. Very clear to me that they know the drill but not sure why they arent up front with it. Just say what it is… essentially a blind auction.

    Feeling like since the house is in a very nice area and list price is about 15-20% below market there will be other offers and I will get a best/final offer response. Not quite sure what we will do but this is good info and has helped us out a lot. Really have to be willing to come up with your own market value in this situation and stick with it. We will probably come up $15k and lose the seller costs… hope we get it.

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  61. Seattle Bubble • Top 10 Most-Viewed Posts of 2011

    [...] 3,255 pageviews, 03/23: REO Buyers: Beware of Multiple Offer Sudden Death [...]

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  62. JB

    This is happening to us now. Wife and I put in an offer on tuesday on a fannie property. It was originally listed at 95k, dropped to 88.9k as we were writing our offer for 87k (it’s assessed at 126k). So we offered 84k and asked for closing costs. They came back yesterday with multiple offer situation giving us till today at noon to submit. We put our offer up to 88.9k since its only 1.9k above what our original offer was going to be anyways and still requested closing costs, so we’ll see what happens.

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  63. Seattle Bubble • Knife-Catcher: The Tour, Offer, Tour Meat Grinder

    [...] Days on Market: 84 Offer: $180,000 on 12/21/2010 Result: 2nd offer during negotiation resulted in multiple offer sudden death, lost to other buyer. Status: Sold 02/12/2011 @ [...]

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  64. Jessica

    Thank you for this article. My husband and I are first time homebuyers and in the past month and a half we’ve dealt with Multiple Offer Sudden Death three times now.

    The first time we raised our price since we had some wiggle room (we’d initially offered lower because the property had been listed for over 90 days). Lost that one.

    The second and third times both properties were new to the market and we went in with our best offer to start so we kept the same offer for Sudden Death. Lost out both of those times as well. (Though we did get put on a backup list for the third property, so at least we know our offer wasn’t bad; someone just made a more enticing one.)

    I’m very glad to know this is common for REO properties and that other people are having this problem. It’s very discouraging to lose out repeatedly, especially when inventory in our area is very slim right now and there’s so much competition in the starter home price range.

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  65. Alicia

    Is it legal for a broker to say there are multiple offers if there are not? Is it possible to find out if there are actually other offers?

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