I received the following email about a new listing. It is a Freddie Mac/HomesSteps foreclosure in Gulf Shores. I thought probably more than one person would like to know how this works, so I am going to post the email and the answer, with details on How It Works. First the question:
"Is $89900 the asking price on this house or is it one of these house where if I give you the full amount someone else can offer higher and they can get it? Or if I gave you $89900 would be mine? It would be cash money. I live about 5 hours away and I would hate to drive down there and then be told that if someone offers more, then they can buy it. That has already happened to me two times."
This is how it works:
Properties are listed on the MLS at a List Price. That is the price the seller is trying to sell the property for. Sellers would like to net as much as they can on the sale of the property. If someone comes along and offers them more than they are asking for, yes, they will usually take it. This usually happens when there are multiple offers on the property or the buyer is concerned that there are going to be multiple offers on the property. But there is more to it than that.
In this case, it is a Freddie Mac foreclosure, so I am going to explain how it works with a Freddie Mac/HomeSteps foreclosure. The procedure can vary with different sellers, and of course Freddie Mac/HomeSteps can change their procedures at any time.
1. Freddie Mac/HomeSteps lists a property with a REALTOR®, who puts the property on the MLS.
2. The 1st 15 days that the property is listed on the MLS it is available for sell to Owner Occupants only. Owner Occupants are buyers who are going to move into the property and live there. This is called the First Look period.
3. Investors are eligible to have their offers accepted on the 16th day.
4. When an offer is written it is entered into the HomeSteps system by the listing agent as soon as they are able, but within 24 hours.
5. Once an offer is entered into the system, if any other offers are received then they are entered into the system as additional offers.
6. Freddie Mac/Homesteps may accept the offer that is in the system or they may counter the offer.
7. If Freddie Mac/Homesteps accepts the offer in the system, any other offer that comes in will be negotiated as a backup offer only.
8. If Freddie Mac/Homesteps counters the offer then they will give the buyer a certain amount of time to accept the counter or counter the offer.
9. If buyer accepts the counter, any other offer that comes in will be negotiated as a backup offer only.
10. If the buyer counters the counter and other offers have been received, then a multiple offer situation exists.
11. In a multiple offer situation all parties are informed in writing that they are in a multiple offer situation. They will be given written notice that they can withdraw their offer, leave their offer the same or change their offer in writing. They are given a deadline to do this.
12. When the deadline arrives all offers are entered into the system and Freddie Mac/HomeSteps chooses which offer they are going to accept or counter.
At any time, in the state of Alabama, until you have a fully ratified contract (signed by all parties) anything can happen. However, this is the instructions listings agents are given to handle offers on Freddie Mac/Homesteps properties.
The property stays on the market until there is an accepted contract. Buyers can make offers even after there is an accepted offer, however they are only considered as backup offers.
This is the system, without regard to negotiating strategies being discussed. That would be an entire other article that I will work on later, but I would like to make one important statement.
The sooner a buyer writes an offer the more likely they will be to not get into multiple offers.