Submitted offer on a REO. Multiple offers present. Bank is... MIA! What would you do?

Question

I submitted an offer on a REO property recently. The offer was all cash and $1,000 over the banks asking price. I called the bank to verify if the offer was received and found out there are "multiple offers" on the property. It has been 10 days now and still no response from the bank. The property is literally a steal so to speak. I'm considering submitting a higher offer as the property is well worth it. Problem is... I'm out of cash. If I was to submit a higher offer I would have to utilize a hard money loan. Cash vs. Hard Money? How do the banks look at that? Should I leave my cash offer of $1k over asking price and hope for the best or submit a higher offer using a hard money loan?

Also, I've heard that banks usually respond to offers on REO properties within a few days, maybe up to a week. What could be causing the delay?

Jeff Copeland · Answer

I agree with @Bob Ebaugh and @Tammy Vitale - $1k over asking is not that much, depending on how the property was priced. I've seen REOs going $10k (20%) or more over asking in St Pete and Pinellas Park recently.

I'm not sure if the banks are pricing low just to start a bidding war, or if the valuation models are just lagging behind reality (probably a bit of both), but the bottom line is you have to ignore the asking price and just make your highest and best offer based on your personal goals and your own analysis of the deal.

As far as how and when the banks notify you - who knows? They all have their own procedures and bureaucracy. I recently made an offer on an REO, only to have the bank come back almost two weeks later with the "highest and best" response. But in most cases, I've had some kind of response from the listing agent within 5 business days. Every bank is different, and every listing is different.

Your offer most likely included an expiration date (it's standard on the FAR-BAR As-Is contract). Once that date has passed, the bank can still consider your offer, but you are not obligated to perform. So you can move on and keep shopping for other deals - if the bank comes back and wants to accept your two week old offer after it has expired, you then have the option of playing ball or telling them no thanks.

Jeff Morelock · Answer

I'm an REO Agent in St Pete FL. These days banks would rather sell a property to an owner/occupant - even with financing. Banks get paid on the day of closing so they don't care if it is an "all cash" offer.

Since banks received bailout money, they have to participate in "neighborhood stabilization" programs which means they want to sell to owner occupants. Many banks instruct listing agents NOT to even accept offers from investors for up to 15 days after the property hits MLS.

Bob's correct. Just about every REO in the Tampa Bay area, and I'd guess all REOs everywhere for that matter, are going to have multiple offers within an hour of hitting MLS. That's why you'll hear the phrase "highest and best" offer a lot when going after REOs.

To you success...

J Scott · Answer

For reference, banks don't care about expiration dates and having one on your offer won't make any difference in the transaction.  A bank will never accept your REO offer without asking you to sign additional documents, so even if they verbally accept your offer, it won't go binding unless/until you sign the other docs.  So, even if you don't put an expiration on your offer (I never do), you'll never get unexpectedly locked into a deal.

Jake Recz · Answer

My bad, I worded my response the wrong way. I just spoke with the bank on Friday I believe. That's when they told me there were multiple offers. I don't know much more. The agent refused to say anything else. They took the property off the MLS- that I know for a fact. I'm working with an agent.

Jake Recz · Answer

I'm starting to understand what the bank is doing. The funding gap is about $15,000. That doesn't include the cost to fix the place up. Any idea on how I can go around that funding gap?

John C S. · Answer

Hey I'm  a new invested but I will take the advice of everyone here it makes a lot of sense. By the way I love st. pete been there many times. Hope to move there one day.

Vivianne Salazar · Answer

Thank you for pointing that out J Scott.  I am not worried about being locked into the deal but it's more of a courtesy not only to the bank but also to my realtor that I am no longer interested beyond that date.  And banks don't care much for a lot of things anyways.

Vivianne Salazar · Answer

Agree with posts above particularly @Mark Elliott and @Jeff Copeland. I put an expiration on my offer so if I don't hear back I know I can move on to another deal. And my offer is based on numbers that work for me, not the seller/bank but I'm pretty conservative with my approach.  If I had a bigger budget I would probably engage a bit more in the bidding war.

Mark Elliott · Answer

i would just sit on your offer. it sounds like the bank accepted another offer. they are really under no obligation to notify you when they do this. if you get it, you get it. if you don't, you don't. move on to the next one. there is always another one out there, but always stand on your final offer.

J Scott · Answer

Most likely the bank awarded the property to another buyer and you just haven't been notified.  Did you submit your offer through a buyers agent or the listing agent?  Regardless, call that agent and ask the status.

Submitted offer on a REO. Multiple offers present. Bank is... MIA! What would you do?

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