Q: I am in the market for a new home, and I am worried. My friend recently put an offer in on a house of $109,000, which was the list price. The bank came back with a counteroffer of $150,000! Is that even ethical? Can the bank really do that? Is that something I should be looking out for?
A: Your question reflects the essence of why I write this column. I know that’s a little heavy, but let me explain. Hindsight for hindsight’s sake sounds a little too much like fodder for guilt or blame or regret for my tastes. Those are probably three of the most counterproductive of all the human emotions, and definitely cause more harm than good.
But looking back at what happened in your own — or a friend’s — past transaction to glean the lessons for how you can avoid the same mistakes, protect yourself or optimize your experience the next time around? Now that’s what I’m talking about! (Translation: Learning from the past is definitely a worthwhile pursuit.)
So here’s the skinny on your friend’s REO offer. Her dismaying surprise at the bank’s counteroffer, which was far and above the list price, might just save you from losing one or two of your "dream" homes. These days, there is an intense amount of competition among buyers, as first-time homebuyers try to close their deals before the Nov. 30 deadline and as cash-waving investors take advantage of what they see as bargain-basement property pricing.
As the tax credit deadline looms nearer, the competition and number of multiple offers grows more and more intense. The result? Many bank-owned homes are selling over the asking price.
That’s probably what happened in your friend’s situation. Her competing offerors viewed the list price like I used to view the speed limit: as a suggested minimum, or starting point. The offer prices went way over asking and, frankly, the bank and listing agent did your friend the favor of giving her another shot at it by issuing a counteroffer — giving her the opportunity to get into the game if she wanted to.
More often, a bank will counter only the top offer or so, or will generically counter all offers asking them to come back with their "highest and best," requiring everyone to take a total shot in the dark about whether it would take an increase of $5,000 or $50,000 (or no increase at all) to get into or retain the top spot. …CONTINUED