It seems as though some agents have made it a practice to "bid up" a bank repo in order to get the property under contract, and then if the appraisal is lower than what they offered they are expecting the bank to pay the difference.
We just recieved notice from one of our asset managers for one of the larger lenders, that (sic) "on FHA multiple offer scenarios, the bank will require the highest bidder to sign an addendum stating that the buyer will make up the shortage in cash between the offered price and the appraised value if the property appraises for less than the purchase price."
They will also need to provide proof that liquid funds are currently available and will be there at closing if needed. (not quite sure how we're going to handle that yet).
In addition, they will be requiring a 1% earnest money deposit.
If the buyer is unwilling to sign this addendum, then they will proceed to the next highest and best offer.
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