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 they 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.

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

Know this — when you are in a multiple-offer situation, you are in a competition. A "good" offer is not enough, because the second- and third-place offers don’t get the house. Every house might not be worth going to your extreme top price for, but you need to be aware of the rules of the game.

To fully answer your question, though, it’s unfortunate, but not at all unethical for the bank to do what it did in your friend’s situation. In fact, as I said, I feel like your friend got better than she would have in the average case, where she’d likely have received nothing more than a rejection.

Why do I think your friend’s loss might be your gain? Well, time and time again I’ve seen buyers ignore their agent’s advice to offer more than the asking price for a listed home because they think the fact that it’s a buyer’s market or that the property is a foreclosure renders an over-asking offer absurd.

Many such buyers lose a couple of homes in this fashion before they get aggressive about offering more than the asking price, while they experience what I call "the market educating them."

In fact, multiple offers and above-asking sales prices are the rule of the day in many areas. Your friend’s experience has very likely opened both her and your eyes to these market realities. When it comes time for you to start your own house hunt, ask your agent to brief you on local list-price-to-sale-price ratios, so you can focus your search on homes listed appropriately lower than the maximum price you can spend, empowering you to compete and offer more than the asking price, as necessary.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.

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