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Over Full Price Offer Rejected in Ann Arbor Area "What"?

Oh, no we didn't get the house A house and five acres is listed at $79,900, and it is in foreclosure.

It was originally listed at $154,900 back in April.

Pattie, one of my Buyer Agents is working with some wonderful first time home buyers and even with a ton of work they want this house and land. It is in a very good school district. Only 2 bedrooms, on a crawl space, less than 1000 square feet and needs a ton of work.

In fact they want it so bad that they want to "pay over asking price." The listing agent that represents the bank tells her another offer came in, but it is not very good and so she gives Pattie time to get her buyers financing approved before submitting both offers.

I told Pattie, that back in the days of a sellers market, after many of my first time buyers would make offers, for less than asking price and didn't get the house, were starting to get frustrated by people out bidding them, I would add the clause:

"One hundred dollars over the highest price offer, with proof of the other offer, not to exceed_________."

It worked every-time, and my buyers would get the house. (Sometimes for just $100.00 over asking price and sometimes less than asking price. It depended on what the other offer was.

So she wrote the offer to say that:

"$100.00 Over asking price with proof of the offer, not to exceed $ 84,000."

That is 4000.00 over what the bank is asking.

The bank handling the foreclosure sent it back, saying that didn't want an escalation clause, and for the buyers to give them their best offer. The buyers wanted to offer $100,000.00 cash.

I told Pattie, that is crazy, you already know the other offer isn't good, (according to the listing agent) and if they pay that much they won't have cash to fix up the house.

So they offer $90,000. cash.

They did not get the house; the bank chose the other offer.

Why?

The price Patties clients offered was better. But, the other offer has NO Contingencies. No inspections, No attorney review, nothing.

So help me out here...

What would you have done?

In a foreclosure I would at least want the Well and Septic to pass inspection and Attorney Review of Title Work. I guess the bank accepted less money, with no inspections. There is nothing in the listing ticket that says, "AS IS".

The buyers, who were awarded the contract, also were paying cash. Not as much but still cash. In fact, a lot less cash.

The buyers were upset, understandably so.

I told Pattie to call the listing agent and kindly ask, "My buyers want this house, what can we do to help them get it?"

Listing agent, "Nothing, I was shocked too. They are not my buyers, not in my office and I was sure they would take your offer." It is a done deal.

Active Rainers, it has been a long time since over full price offers even have to even be written in the Ann Arbor, Mi area.

I always want to learn from experiences like this, so help me out here.

What could have been done differently ?

Posted by Missy Caulk-Ann Arbor- Realtor(R)- Ann Arbor Real Estate on 12/14/2007 06:43 AM

Comments (68)

ann arbor, mi, buyers

Post is included in group: RE/MAX Active Rain Bloggers

68 Comments on Over Full Price Offer Rejected in Ann Arbor Area "What"?

DEC

2007

Missy, that just stinks! I think banks are hard to deal with on foreclosures. You would think they would want to get rid of them and make a little money. What happened to your buyer agent and her clients is just wrong. Could it be that someone in the bank knew the buyers and made sure their offer was pushed through? Just a thought.

Some banks do not care...they will take the offer they feel fits what they are looking for..it's not always about the price...maybe the take the way it is was better for them so they do not have the hassle if there are issues later.

Missy, not sure that I can help here but thought I'd comment. Last month I previewed a GORGEOUS home which had sold last year for $390K and it was listed as a short sale for $204K. I knew for a fact they were looking for a bidding war and that is what they got. The day I previewed there were two other agents walking their clients through it. The agent told me she had received 3 offers in the first 2 days and I am sure the people there were going to submit offers as well. They knew every offer would come in above list price. The home was in impeccable condition and worth at least $350K. I was actually surprised that the bank with this extremely low list price but it seemed to work in this case.

oh, the reason I was surprised is because our market has about 55 months of inventory and where the home is located has about 8 YEARS worth of inventory. Even in this market they had a bidding war.

Linda, I don't think the bank knew them. I think they just wanted less hassle.

Neal, I think that is probably it. Actually, I think banks never care, not some but ALL.

Maggie, thanks for sharing, I was just shocked since our price was much, much better.

Missy, sounds like the bank wanted the cleanest contract in respect to their liability. No inspections, no attorney review, just cash and done. I have seen sellers take less money just because there was no contingencies on the contract.

With the bank issues I have been going through lately, all I have to say is

Banks are under their own rule and don't have to make sense to anyone else apparently..

Wow, what a bummer for the client. Somethings just make you shake your head. I would have asked for the same insp etc that you did. The fact that the bank chose the lower offer without those would indicate to me that there might be a problem you buyers want no part of anyway. Everything happens for a reason, whether I like it or not.. just my 2 cents! Hugs dear!

Very often it's a case of one party giving too much weight to what they think the other party wants. When more money doesn't push the seller's button, we then need to ask ... Am I pushing the right button?

With the bank issues I have been going through lately, all I have to say is

Banks are under their own rule and don't have to make sense to anyone else apparently..

Hi Missy, That is crazy! It sounds like they took the easiest one...less likely to have something come up an back out. I don't think you did anything wrong...I just think that the other people are crazy for not wanting inspections. :)

We see that here sometimes, the bank or relo company will take the that has the least chances of falling through, not necessarily the 'best' contract. Sorry that happened!

Missy:

It has been my experience that banks aren't always looking for the highest purchase price but the easiest deal to put together that shields them from any extra work or hassle. Who knows, this may very well be a blessing in disguise for your clients and for your team?

Personally, I think your advice was sound and you handled it perfectly. Sometimes that is all that we can do.

Do Nothing different. You represented your buyers well. As you say they were first time buyers and could have been in for nasty shocks and surprises without an inspection. They may not thank you right away but you did the right thing. Even if you had advised them that the bank might takea clean offer and left it up to them they might have been tempted and made a bad mistake. Sometimes right doesn't feel good

Maggie, that is unbelievable, but just confirms homes that are a great deal, buyers are jumping on. We saw it here with all the Pfizer homes.

Kim, I wish it had it in the listing ticket "as is" although on well and septic they still should have inspected it. In our county in order for a deed to transfer it must pass these 2 inspections or the title companies can't transfer the deed.

Vanessa, Banks are under their own rule and don't have to make sense to anyone else apparently.. Yes, I am seeing this too. Actually I don't do a ton of forclosures.

Andrew, thanks I think we asked too late.

Stephanie, I think it might ultimately be a blessing in disquise, but they are so disappointed.

Jessica, thanks I just told Stephanie that same thing.

Charles, no in this case right doesn't FEEL good. We'll find them something after they get over the disappointment.

This is one of the problem with buying a foreclosure. You really need to be prepared to buy a "pig in a poke". A concept that few buyers understand.

Had they been the only offer, they would probably have gotten it. But, the bank took less money to have a "down and dirty", meaning no contingencies. Can't blame the bank. They found a buyer willing to buy a "pig in a poke".

Most buyers don't have the stomach for "as is" contracts. The risk tollerance of the average home buyer is nill.

The buyers that got the contract might have to invest another $30-50K to put the home in top condition of the well and septic fail. That's more risk than most buyers are willing to take.

Missy, Sorry, but a bank being offered cash and no contingencies...that's like manna from heaven to them. There was probably no way that you could go up against that. But one thing you wish to do in the future is instead of a 'regular' contingency clause have one or at least an addendum stating 'only lender required repairs.' Now don't get me wrong I'm not saying to negate your kick-out clause for a non-satisfactory inspection.

Missy, sounds like the bank was looking for a SURE DEAL at any price, meaning no inspections with no repairs or warranties, That is not a scenerio you or I would want for first-time home buyers. The surprises after moving in could be very ugly and expensive. I think you did exactly what an agent would do to protect their buyer.

Missy - I couldn't in my right conscious allow my buyers not to get inspections. You did nothing wrong.

REOs and short sales are rough to get by in our market also. Ours are listed as is and buyers must sign a waiver of an SRPD (real property disclosure). I think the banks are sitting around waiting for clean offers here and they are getting them as this is the best sector of our resale market.

I think the one thing I would have done is pre-inspect so that your offer could be cleaner and for more money, although I realize the well/septic takes too long for that. Funny how smack dab in the middle of a buyer's market we have seller's market tactics! The risk of those inspections tanking a deal is too much for some sellers to handle...

I've written a lot of multiples this year and had a condo sell with an escalation clause used. Once that sweet spot is reached on price, it draws them in. So much so that our premade packets have escalation clauses ready for usage.

Hope your buyers can find another great buy...

Missy, I'm not surprise that they didn't want an escalation clause, I know I've had clients bid on reo's before with multiple bids and after a few counters they asked everyone for their best & final offer.

I am shocked however, that they didn't accept your offer, being that it was significantly higher. I list reo's for 1 bank, but I guess every bank is different. When working as a buyers agent with reo's I always tell my clients there's no rhyme or reason as to how the banks make their decission. I guess that stands true.

It sure sounds good to hear - offers over asking price, haven't heard that in a while!

Missy,

What was the closing date on the accepted offer...this year? And sometimes they just want 'to get it off their books' quickly! Thanks, Fran

This has happened to me before. Usually it ends up that the bank is selling to an investor...they just have more ability to take chances like that (no inspection, no attorney review, etc.) than a normal buyer. It's a bummer.

Missy~ I think your buyers should be thrilled that you were guiding them. Like others above have said, who knows what the bank is looking for in the contract, and clear and free from contingencies probably does make sense. Its unfortunate that these buyers have gotten themselves so emotionally invested in a very difficult scenario.

Missy--What a frustrating experience for your team and your clients! It wasn't the house for them. If the septic and well are bad, or any other myriad of items and you had suggested no inspection to get the house, the costs could be much higher. The bank just wanted out. Frustrating to buyers but your job is to protect them. Your buyers' agent did their job!

If you learned anything here, preparing the buyer that when working with banks a full price offer can be rejected is the only suggestion.

I have listed many REO properties and some of the things that the banks and or asset companies sometimes don't make sense, but what does anymore? I have had situations where you do get 2 offers, 1 cash 1 financed, the bank knows that sometime the cash in hand although lower is worth not taking the risk. I had one where they took the higher financed offer and had to put some money into the property as the buyers lender would not approve the appraisal due to some issues.

They ended up delaying a month and getting the same as the cash quick close. It is always a hard reality for a buyer to loose a house with a higher offer, but that is the unfortunate reality of the REO property.

Brian Corwell

RE/MAX Sauk Valley

Sterling, Illinois Real Estate

In REO cash always wins out unless the offer is alot and i mean alot higher than one with contingencies. The secret is to offer cash to win, most of the bank contracts give an option once they are prepared though so you can switch to financing. Its all a game

You spoke of how much work the house would need. You did the right thing insisting on a home inspection. The banks do have a mind of their own.

Can't say much more that has already been discussed (darn time difference...I get here late :) Lenn said it best (doesn't she always put some flaire into it....like pig in a poke haha) Good one Missy...bottom line....we want to represent the buyer and always be doing in their best interests. It's a mute cause to wonder when we know it was about contingencies :) and when we know we would not have deleted them all for the sake of a sale :)

Missy- I truly believe (and I tell my clients) some deals are just meant to be. I would never advise my buyer to NOT do an inspection on a home. Even bank-owned; while the bank won't fix anything - you still need to inspect things.

We must protect our clients. I think your offer was excellent. I have lost 2 deals this year to "Cash" / "No contingency" offers. However, both were close to the same asking price.

I would also wonder about closing date? Maybe they could close quicker and the bank wanted it off their books before years end?

Lenn, thanks for your thoughts always welcome, it is true that most buyers don't have a stomach for a pig in a poke. I guess these buyers did and unfortunately for them lost out.

Marc, I find it is always, always, alway easier to deal with real sellers and not banks. Mana from heaven is one way to put it. LOL

Gail, I agree and thank you. How awful to get in and the well be contaminated and the drain field gone. For all we know it could have been draining into a near by cornfield.

Candy, appreciate it.

Renee, I think all banks are different, those backed by fannie mae go somewhat smoother, at least we got an answer back in a couple of days and not months.

Josette, Funny how smack dab in the middle of a buyer's market we have seller's market tactics. Yea, I was amazed too. Good thought but time was of the essense because of the other offer.

Mike, it was over full price by a lot. So that was a surprise. I will definately, tell future buyers and all my BS to tell the future buyers there is no rhyme or reason to what they do.

Fran, yes it would close in 2 weeks from our end, so before the new year.

Kelly, could be, I really don't know anything about the other buyers.

Lisa, it is too bad.

Teri, thanks and we will definately let them know all this. Problem is we were lead to believe the other offer was not as good as the first one. I felt bad they were offering 90K, but they wanted it so bad, I told Pattie well you have to do as they want.

Brian, thanks so much for commenting.

E Jeffery, thanks for the tip on it being a game. Didn't know you could do that. Wow, great advice. Our cash offer was higher, there's with no contingencies.

Latonia, thanks hope they see it that way for Patties and their sakes.

Sally, if we have known about the other no contingencies, these kids would have offererd without them. I only hope that they consider this a "must not meant to be" scenerio.

Missy,

Missed you at the Women's council meeting this morning but now I can see why. Business is busy and sometimes frustrating. Wonder if the other party is going to live in the home. Some listing agents have asked that and I've been told it helps but your buyers were going to live in the home!

I too was told to take out the escalation clause when I made an offer on bank owned but I'm sorry how yours turned out. I'd be happy to talk to your buyer agent if she's really frustrated. I know too, I've been there. We all know how she feels if that helps.

Missy..... I don't have much to offer here. I will agree that some banks just want less hassle. Especially since the other offer was cash. But I guess I would have taken my chance with the larger cash offer. And I agree, I think you handled it well and gave the best advice. Sorry that it happened. I guess it's weird, considering that there are so many homes on the market.

I have found that banks want highest and best 1st time out, most offers are even required to be on bank contracts and addendums. These addendums usually remove all contingencies anyway.

Would of Could ofs -

Hindsite I would have inspected prior to finalizing the contract.

The property still must be conveyed with a clear title?

And then my favorite Real Estate term NEXT. I am sorry it did not work out but it just was not meant to be.

Karen, thanks Kevin is here now working on my computer. But, he thinks it is the hard drive. So at this point I am only doing what is necessary.

Jeff, thanks for your support.

Rebecca, yes NEXT and I ( we ) learned a few things.

Missy,

It's unfortunate that this happened to your buyers. How much better can you get than what they offered? No strings attached. That's all the banks want these days to ensure that the deal goes to closing. I deal with this a lot now because of the investor clients I work with.

I have my clients look at the costs of having the repairs done and include the price of any "maybes" that will pop up, like septics and such. I have them figure out what the property is worth to them with all those things taken care of and we subtract the cost from that number, coming up with the offer price. In this example, I would have paid close to full price if the costs were in line with their highest offer price.

The problem with this is that they have to be sure of accepting all of the surprises that come along with buying a property without an inspection. I can usually get around this by making sure they have their contractor who will do the repairs come along to give us a good estimate of the costs involved.

If they are afraid of buying the property that way, they need to walk away and look elsewhere. In the end, it may be a Godsend that they didn't get the house. Better luck for your buyer agent and their client next time.

Missy, maybe someday the buyers will look at this as a God Sent. I agree with the no contingencies but no attorney review and no inspections; I DON'T THINK SO! If people went in to foreclosure that did not just happen they probably have not been taking care of their house for a VERY long time; no telling what inspections would find. I realize with foreclosures that they won't do repairs but my feeling is that the buyer should at least know what they are getting in to. That can only be done with inspections.

Missy - There are always two sides to every story. 1st let me say that there is no way I would ever advise a client not to have contingencies for home, well, and septic. Those things are far too important and would create problems that are far too costly to fix, especially with someone on a tight budget. On the other side of the coin I don't' think the bank made a bad choice. If I were in their shoes and the offers were not substantially apart, I would take the one with out contigencies too. It just makes good business sense. Life sometimes isn't fair but I don't see any surprise in this scenerio.

MISSY: I wouldn't have done a thing differently. Even though the buyers really wanted this house, it would have been terrible advice to make their offer totally "as-is." What if, down the road, they found something major wrong with the house? They would not have been happy with you, and they would have been in trouble. Sometimes, things just aren't meant to be. If they're patient. they'll find something just as good, or better. It's not worth taking unnecessary risks just to get one house. No house is that perfect. Just my 2 cents.

Missy,

Since I didn't read through all of your response, I'm not sure if this has been covered.

Not sure about your state, however in CA our REO sales are normally "as is", therefore most buyers do their homework in advance. Today we are seeing offers accepted at a lower price without contingencies, than higher ones with them.

I think the only thing we can do with our buyers is explain their options and they can make an informed decision themselves.

Andrew, thanks for all your advice. I really appreciate it.

Marchel, I agree that should have at least been able to see exactly what they were getting into. Then they could have made a decision based on the facts.

Adam, your back..... good. You were missed. Doing OK ?

Lynda, we don't have that in MI. If there was not another offer, I suppose we could have done it one, but then why would we because it would have been accepted and it would have not been a issue.

Bill, LOL well as a non interested party you definately see both sides. I always see the side of my clients and I feel bad for them, but I know it will work out. The only surprise to us was Listing Agent saying the offer was not good. If she had said the offer is not good but has no contingencies we would have worded it differently in that the buyers really, really wanted the house.

Missy that's a bummer. Not much else you could have done. Banks do what they want. I have negotiated on many bank opwned properties and they are never easy. You just to get the right offer in at the right time or you lose. There really is nothing else you could have done unless the buyers were willing to go contigency free. That's what banks want.

Bryant, apparently they do, I just don't do that many and didn't know it was SOP. Oh well, next time. Thanks for your wisdom.

Missy, I'm sorry and kind of shocked to hear this. Apparently the bank did not want inspections done and did now want to be bothered. If I were a realtor I would still have advised my clients to have them done. It certainly wasn't meant to be for them and they may be glad one day when they find out all the issues this property most likely had.

Missy: Banks have their own formula for calculating the best deal. I've been involved in a few of these 'no brainers' that the bank did not accept. I don't have an answer...just questions. Isn't it great to be able to put our heads together?? I love it! GBU!

Missy the bank took the easy route. The only thing that could have been done differently is foregoing contigencies; which I personally never recommends.

Missy, I just had buyers lose a bankruptcy property not because of money or contingencies - they even removed the financing contingency when asked to - but because they stated too many "deficiencies" to justify their price. The father of the buyer hand-delivered a list to the listing agent (envision me slapping my forehead here...). The trustee for the bankruptcy sale thought there was a chance they might pull out at the last minute, among other complications. I agree the well and septic are necessary but even with arsenic in the well, they were moving forward without hesitation.

On the bright side though, my sellers with two properties listed received offers on both properties last Sunday - they accepted the over-list-price offer on one and rejected the under-list-price offer on the other. They have to live somewhere until they find the next place! Good things are happening in A2, no doubt!

Carole, I hope so.

Elizabeth, Yes it really is, I learned alot from this post.

Jennifer, I don't either ONLY if the buyer refuses and then we make them sign a statement that they were advised to have an inspection.

Susan, I lost a sale this summer because a father-in-law got involved. Great, sounds like you are really busy. That's great, lots of Ann Arbor agents are now. Go figure.

Unless you knew that the other offer was cash as-is with no due diligence, there isn't much you can do. For a buyer to make that kind of an offer, it needs to be low. The other buyers probably factored in a new septic tank and maybe looked at the well logs to see what the last recorded flow was. You can get well testing data in Oregon as well.

I guess if it was me, I would have pulled the well testing data from the state as well as the septic records to see if any work or problems recently arose. Still, buing a house without an inspection is risky.

Melina, my son's girlfriend is named Melina, she is in town this weekend visiting.

Thanks for your comment and it is VERY risky to buy a home without an inspection.

Missy

Here banks and asset companies do not mess with any contigencies or mediation. Repairs are almost impossible if anything it will be a reduction in price. So really its here is the house, we have no sellers disclosure,survey or any other info and the price is ???? so buy it or leave. They have so many of them they are not messing around with any offer that takes time, they want a contract with a fast sure closing.

Hi Missy - it would seem to me that the terms would have needed to be different. Terms meaning all the other things you mentioned outside of the price offered - inspections, contingencies, deposit, etc. Banks dealing with properties they've foreclosed on are wanting out in the easiest way possible, and with those properties, for the most part, being under priced for the market, they're usually going to garner multiple offers and those other terms become major factors in offers.

The listing didn't need to say 'as is' for that to become part of the picture. All parts of an offer are terms, and any/all of those are pieces to the pie. If some of those pieces are nicer looking in one offer compared to the other, guess which way they're likely leaning?

A regular homeowner would likely have gone with your offer because they're 'real' people. Not so with banks, mortgage companies or holding companies on these foreclosure and short-sale properties.

Bummer that your people didn't get it.....
Ann

DEC

2007

Missy- you've got a ton of comments here, and my time is short-- so if I repeat everything that 's already been said, please forgive me!!

It has been my experience that the bank wants the cleanest offer possible- even if they don't say "as is", they want "as is." Why? Because it's FASTER. For most of the banks, faster and cleaner trumps a higher price.

Secondly, you have to consider that many of the asset managers in charge of negotiating the contracts these days have little or no experience doing so. The banks are churning out employees as fast as they can get them on the books, and it is evident when speaking with many of them that they don't understand a good offer when they see it. I talked to a new one this week that didn't understand what a "pest inspection" could possibly have to do with beetles. Kind of makes you scratch your head...

Missy...You have a lot of good comments here...sometimes you just have to walk away. I think you did everything you could do.

From the scuttle-but around my area it appears the banks are looking at terms more closely and giving more weight to those offers that have fewer, if none, contingencies. I am seeing so many foreclosures going pending, then 10 days or so later coming back on the market. With that time frame you know it's the inspection that killed the deal. I'm sure the powers that be at the banks are thinking the same thing...no inspection? No other contingencies? Go for it!

I wonder though, do their stockholders know that they are turning down more money?

Missy, your buyers agent did everything correctly. She was an advocate for your client - not having inspections could have had horrific consequences for the buyers later on. (Especially with a septic field!)

Tim, thanks for the information.

Ann, thanks we'll do that next time, if the buyers are sure that they can purchase without contingencies.

Monika, thanks I do think we would have got the house if the no contingency offer was not on the table. Lesson learned.

Kris, I think so too, I believe it is really up to the buyers if they want to take that risk. I guess they could have done the inspections but not make the offer contingent on them. I think I am hearing loud and clear they want easy.

Missy: The banks also want fast - it's the end of they year, they want as many off their books as possible because they know the inventory will still be high next year.

I agree that certain contingencies are necessary to protect your clients - especially with a foreclosure, since the buyer will have no recourse.

Banks are in business to loan money not own real estate, and Kris is right--they want to clear REOs off the books as fast as possible. Contingencies and inspections simply do not fit into their plan. Plus, bankers really relate to cash! The other offer simply trumped yours in the eyes of the decision maker.

Missy - the bank could have known that there was work needed on the house that would exceed the offer your client made, and so it was better for them to accept "less" from the other party. it also could be that the other party had an "unofficial" inspection by a friend who is an inspector or contractor and who checked the house out during the showing, so they were in a better position to price the risk. If your client could not tolerate the risk, there isn't much more you could have done IMO.

Missy it hurts I am sure but there wasn't much more you could have done in this situation. The only way would have been matching the other offers terms and more money.

Kris, next time I'll know and keep that in mind. Silly me, we thought they wanted more money.

Norma, apparently, even though ours was also cash.

Margaret, thanks for your wisdom.

Faina, yes they could have known something we didn't.. like the drain field went into a corn field or something.

Jay, our price was higher but we wanted inspections. Their mom was concerned about a factory near by. Smart I think

I'm actually not that surprised. This got the deal done faster for them. I would never advise a client to forego inspections but that doesn't mean the offer has to be contingent on them. Too bad the agent couldn't give you more details on the offer so you would have had a better idea what you were up against. Did your buyer's agent ask the listing agent what would the bank prefer, more money or less contingencies, quicker settlement?

Live and learn!

Krista, the listing agent ONLY told us the other was not a good offer.

Missy,

This is the time of year to write those NO CONTINGENCY offers - I met an investor couple today at an open house and convinced them to drive back tomorrow morning from Dana Point - a good 2 hour drive to make that same kind of offer - 10 days all cash - close before the end of the year!

Now Have a Blessed Day, and

Remember the Reason for the Season!

John Occhi, Hemet REALTOR®
Mission Grove Realty

DEC

2007

I just put a home under contract yesterday. My seller got a letter last wek that her mortgage company, the USDA, has started foreclosure proceedings. I'm just hoping the let the sale o through and don't do anything to screw it up.

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