Price Reduction after Under Agreement?

Question

I made an offer on a foreclosed property recently. After several days, there was a reduction in the price by $8,000 on the MLS. The next day they accepted my offer which was over the asking price! What does this mean?? Why was the price reduced before they agreed to my offer? Was it the listing agent or the bank that reduced the price? When they come back with the purchase and sale agreement, can I renegotiate the price down because they reduced it before they agreed to my offer? Thanks for any insight!!

Stephani Davis · Answer

I have had the banks lower the listing price many times after I have made my offer to them, and sometimes after they accept it.  It's never been a big deal to me, because I will not move forward with a deal unless I am happy with the numbers.... If you offered X amount, and the bank accepted your offer, I don't see why it would matter if the bank then lowered the price.

Your offers should be based on what price works for you, not what price the house is listed at.

If you haven't signed the bank's addendum, then you can back out of the deal, but, like your agent said, they probably are not going to want to work with you if you try and come back with a lower offer.

Steph

J Scott · Answer

You can certainly get out of the deal if you want (financing contingency, don't sign the addenda, due diligence period, etc), but if you do, you risk pissing off your agent, the listing agent, and the seller.

Presumably your offer was a good deal for you (or you wouldn't have made it), so why not just accept the deal and move forward?

Donald M. · Answer

Thanks for the input everyone!
            
            I spoke to my agent today and told him of my plans to allow the 48 hour deadline to expire and then submit a new offer and he told me flat-out that we will lose this deal because the banks do not want any hassle and are going to think I am not serious with my second offer. 
            
            I brought up the point that the reduction in price after I submitted my offer was very suspicious and he said that it is simply a game that the listing agent is playing to show that the price he got is much higher than listing so he will get more listings from the bank. I don't know if this quite makes sense but I'm still not sure of how to interpret it.
            
            My agent also mentioned that we can't make changes to the P&S agreement they sent which it does state many times in the P&S and that we have to play by the bank's rules and things will be much smoother after I give the bank the certified check with the signed P&S. 
            
            Is all of this true when dealing with banks? Do I have to play by their rules?

Also, how do you usually submit offers? My agent has a 1-page form he usually uses, is this standard or should it be very long with lots of clauses?
            
            I would probably switch agents at this point but I have been with this person for months now and prefer to dictate the course rather than try to find a new person. I am pretty sure he is well-meaning and he has gotten several foreclosures and many regular deals for past clients.

Donald M. · Answer

Contingent on financing. I did have to send the first offer with a preapproval letter from a particular company this bank always goes with, but I do not intend to go with them for financing.

Account Closed · Answer

Are you bringing all cash to the closing or are you making this offer contingent on getting financing?

Curt Davis · Answer

I had a situation where I had offered $47,900 and the bank countered at $48,500. When I told my agent to accept the offer I noticed the price dropped to $45,900 the next day. My agent told me of the change and I told her to accept their new reduced price and I locked it up.

Christian Malesic · Answer

I ditto that you MUST always have an expiration date.  I am really surprised at the poor advice of this Realtor of yours.  You should investigate this fellow further.  Did he just really mess up one thing? Or, is he a screw up?

As Harrison alluded to, but did not actually say, often your deadline will expire and they will not have signed.  Then, at some point after the expiration, they may come back to you.  If you stop to think of it, the roles are now reversed.  They are making an offer (the seller) and it is up to you to accept (the buyer) in order to have a contract.  This may not be readily apparent if they simply accept what you previously offered, but is much more clear if they 'counter' offer.

Harrison Painter · Answer

Wow....ALWAYS give a deadline. That was poor advice from your Realtor in my opinion. I understand their reasoning, but it takes away from your position.
            
            Here is how I run offers via REO's that are listed on the MLS in the states I am licensed in.
            
            We put in offers on bank owned and give them 48 hours to respond. (They never meet the deadline). Most of the time they come back in 5-7 days if they accept the offer. 
            
            Then they will send the bank addendum. You really do not have a deal until you have read and agreed to the terms in the addendum. The addendum make changes to the Purchase Agreement, so they MUST be agreed and signed by both parties to have a deal.
            
            I would also hope that you did not give them any earnest money at this point. We do not send in the earnest money until we have all the paperwork reviewed and signed. 
            
            Unless the deal makes sense at your current price and the $6K up premium is not worth losing future profits over, my advice would be to let this deal fall through and make another offer based on the new MLS listing price, 
            
            At this point it comes down to what the property is worth to you and if you are willing to risk the deal over $6K based on your projections.

Donald M. · Answer

So to explain more fully what happened:
                        
                        I sent an offer on this foreclosed property without a deadline (probably a mistake, but my real estate agent advised me not to give a deadline since we are dealing with a bank and they have their own procedures, etc.). 
                        
                        In the offer I specified a price, a downpayment, mentioned that it was subject to financing and satisfactory condo documents. My offer price was $6,000 above asking.
                        
                        4 days after we sent the offer to the listing agent, the price on the MLS was reduced by $8,000. What this means I have no idea. Could the listing agent have held onto my offer, then reduced the price on the MLS and then sent it to the bank showing that he got a price way higher than asking? Did the bank reduce the price to create more interest in case my offer falls through?
                        
My other question is that they sent a P&S agreement 2 days after they accepted my offer specifying all kinds of terms and conditions. I am assuming this nullifies my initial offer so that I am not bound to anything if I don't sign it within the 2 days they have given me? Why don't I allow this to fall through and then make another offer closer to the price reduction that they made?