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Lynnie

SoWal Insider
Apr 18, 2007
8,176
431
SoBuc
has anyone tried a reverse auction approach?

Particularly in the case of homogeneous properties...for example.....multiple vacant lots within the same subdivision which are held in OREO by different banks.

How does this work?
 

Joe Mammy

Beach Lover
Mar 26, 2007
140
40
If you think you really want an REO property and you belive other offers are close but don't know exactly - so might loose out - offer the bank to pay the amount equal to the highest bid plus $1,000. We used this with a aproperty and the bank took it.


How did you word this offer in your contract? In all of the REO offers I have dealt with (about 15) the listing agent submits the offers by filling out forms online that are submitted to the bank's asset mgr for the property. That makes every part of the offer extremely black and white and the bank is only weighing a bottom line.

And how do you know what the highest offer was that you are bidding $1K over?
 

Smiling JOe

SoWal Expert
Nov 18, 2004
31,648
1,773
yep, and the bank's asset manager doesn't want to know who is paying for what in closing costs. You have to give them a dollar amount of how much the bank will be paying. I mostly run from those. What is a Realtor for, if they cannot present offers and explain things? Since in those cases, the buyer's agent is doing all of the work, they should be getting most of the brokerage fee. (but hey, what do i know?)

Highest bid plus $1,000 written as so in an offer can get a buyer screwed out of the wazoo if the bank happens to have someone handy who can offer an amount equal or greater than the amount of the payoff of the former noteholder. eg- market value of house today is $300,000. The former owner who was foreclosed upon by the bank, owed $500,000 on the note. Offers come in around $290,000, along with one which states, highest offer plus $1,000. Banker goes to a friend and says, "give me an offer (remind you, not a contract), of $600,000 for this property. Guess who the winner of the contract is. YOU! or, in reality, the bank because you just got hosed for $300,000 more than the house is worth.
 

destintide

Beach Comber
Feb 25, 2009
12
3
How does this work?

not entirely sure...but i think

First, an individual would identify several properties which you have an interest in & the corresponding banks which own the properties. The prospective buyer then would then ask the banks to provide an offer to sell the property and provide a specified time period which the auction would be open. Upon the earlier of the receipt of all bids or closing of the auction period the lowest bid wins the auction and buyer purchases property at the winning lowest bid.

I can certainly imagine a number of difficulties, issues, &/or problems in this process but, in theory, a reverse auction would provide the buyer the lowest purchase price possible.
 

destintide

Beach Comber
Feb 25, 2009
12
3
Offers come in around $290,000, along with one which states, highest offer plus $1,000. Banker goes to a friend and says, "give me an offer (remind you, not a contract), of $600,000 for this property. Guess who the winner of the contract is. YOU! or, in reality, the bank because you just got hosed for $300,000 more than the house is worth.

this would be a big no-no!! i like to think folks are more ethical than that....but

Could an appraisal contingency mitigate this concern? If not, then the question would become how can you define an arms-length or "legitimate" offer.

Truthfully, I've never seen much of a need of a highest bid + offer as, at least in my experience & in this type market, it is a rare occasion when you have multiple offers coming in simultaneously.
 

Miss Critter

Beach Fanatic
Mar 8, 2008
3,416
2,116
My perfect beach
How about +$1,000 not to exceed ___ with certifiable proof of next highest offer? Would that work?

I've heard of reverse auctions in the traditional sense, with an auctioneer leading the bidding. As price decreases, first bid gets it. Prior to first bid, there are no offers. First bid is therefore highest offer. I can't see it working with written offers, simply because the offers are, well, offers. In writing. A seller would have to be pretty non-Mensa to agree to that. Plus, can you imagine the lawsuits from the higher bidders?
 

Joe Mammy

Beach Lover
Mar 26, 2007
140
40
this would be a big no-no!! i like to think folks are more ethical than that....but

Could an appraisal contingency mitigate this concern? If not, then the question would become how can you define an arms-length or "legitimate" offer.

Truthfully, I've never seen much of a need of a highest bid + offer as, at least in my experience & in this type market, it is a rare occasion when you have multiple offers coming in simultaneously.

Not anymore. Just this past week an REO condo came on the market at Blue Surf in Miramar Beach for $150K. I sent it out to my buyers and instantly had 3 interested parties - I had to hold my own mini-auction and then submitted an offer of $170K. The seller accepted another offer. I won't know what it is until it closes in a few weeks.

There were two other agents in my office that submitted offers too. One told me the listing agent received 11 offers!

These REOs are purposefully listed at very attractive prices to bring in multiple offers and then you are asked for "highest and best".
 

Smiling JOe

SoWal Expert
Nov 18, 2004
31,648
1,773
The last house I sold had five offers. My buyer got the contract at above list price. I understand that at least two offers were at list price.

A house I am showing tomorrow has multiple offers on the table. It is very common if the price is attractive. Look at the statistics -- cash buyers are typically very knowledgeable about the current market, and have typically been studying the market for a while. Cash buyers in South Walton, on average, pay only only about 2% less than list price, compared to buyers who finance, paying about 10% less than list price. Why? My theory is that the cash buyers are buying only the best values, and are having to compete with other buyers.

The only reason why I bring up the highest offer plus $1000 is because someone is likely to take your advise and get screwed. Be careful when giving advise like that. This is the internet and someone is likely to believe everything they read.
 
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