Freddie Mac's HomeStep program, the vehicle through which the company sells its foreclosed property or REO, is experiencing increased numbers of multiple offers on its property a company executive said today.  Buyer demand is colliding with shrinking supplies of REO and, according to HomeSteps Senior Vice President Chris Bowden, Freddie Mac's real estate sales unit sold two homes during the second quarter for every new home the unit received.

In an article in Freddie Mac's Executive Perspectives blog Bowden writes that this is good news for taxpayers who are currently benefiting from Freddie Mac's profits, however, some potential buyers may be worried about being priced out of the REO market.  The brokers who handle HomeStep properties are getting more questions from those buyers about how multiple offers are handled and how buyers can best position themselves to submit a winning one.

Bowden explained the HomeStep process.  First listing brokers are required to enter all offers received into the web-based system and a cut-off day and time for submitting offers is set.   This date is communicated to each of the competing buyers' agents.  Any subsequent offers received before the cut-off are also entered into the system.

When the cut-off expires Freddie Mac evaluates the offers to determine the highest and best one. In addition to price the evaluation looks at other factors including the concessions the buyer is requesting, the buyer's intent to live in the home (about two-thirds of buyers are owner occupants) and the buyer's capacity to close the transaction. 

If any additional offers are submitted after the cut-off they are entered into the system as well, but their post-cut off submission is noted.  These offers are kept and evaluated in the event the offer initially accepted fails to close.

Bowden said the best tip for submitting an accepted offer is to do basic due diligence.  A buyer should determine how much home he or she can truly afford and if an affordable home meets his or her goals.  Buyers might consider meeting with a HUD approved housing counselor or getting approved for a mortgage by a responsible lender. 

Next, he says, is the market homework, preferably done with the help of a real estate agent.  A buyer should identify the communities that have homes within the established price range and with the "must have" features.  Locations should be prioritized and communicated to the real estate agent so he or she can signal the buyer when an appropriate house hits the market.

A buyer can get a leg up by using the Freddie Mac/HomeSteps First Look program which gives first-time homebuyers a 20-day window in which to submit offers on new listings without competition from investors.  HomeSteps homes typically sell for an average of 95 percent of market value - helpful information to consider when making an offer, Bowden says.

The bottom line is, "If you expect to succeed when there are multiple offers in a competitive market for a foreclosed home, do your homework," he says, "then make sure your first offer is your highest and best offer."