I'm no fan of banks, but I don't see a problem here, at least on the surface of it. If they are taking bids, it means they plan to sell to the highest qualified bidder. I don't see how giving them your financials will affect the outcome.

A pre -approval letter has nothing to do with financial disclosures. It only states that your lender has pre-approved you for a certain amount. They don't list your income, debt, how much you can afford, etc. The sellers will never know what you can afford unless you tell them or bid you maximum pre-approval amount.

Example: If you are pre-approved for a $500,000 loan, but your bid on the house is only $250,000, your pre-approval letter should only be for the ammount of $200,000, which is less the 20% down payment.

Some pre-approval letters will also include the interest rate and term.

The only time your finacials would be required, is if your are applying for seller financing.

I can see where it may seem you are tipping you hand, but as the PP mentioned, if there are multiple offers coming in, the bank is not using your financial info as a bargaining tool, merely a screening measure.

As rar1 said, I think you are misunderstanding what a preapproval letter is. They are usually only a few lines long. They just say you are pre-approved for a loan of x amount. The lender will gladly provide you with a letter matching your offer amount instead of your maximum approved amount. It won't reveal any of your financial details.

rar1 and billl-

I think the OP is saying that the bank who owns the house wants her to submit her info so THEY can pre-approve her. They won't do this unless she gives them some financial info which she feels will put her in a less than fair bargaining situation.

I think the OP is saying that the bank who owns the house wants her to submit her info so THEY can pre-approve her.

That is how I read it. I thought the OP was pretty clear.

Hmmm...is the bank also providing financing, or is the OP providing his own? If it's the latter, I can see where the bank would want a pre-approval letter and for OP to provide evidence of the downpayment involved.

The bank that owns the house requires a pre-approval letter from them to bid on the house. They will not accept your bid if the pre-approval is from a diffrent bank. So you have to supply all your financial info to the same bank that owns the house to put a bid in on it. I sure wouldn't give a normal seller that kind of info.

Of course lately they have the house on the market for a week and ask for highest and best offer and take the one they think is best. It would be more of a problem if they only had one offer and countered back.

I would have no problem supplying them with a pre-approval letter from another bank then they don't have all my info just what I want to give them.

In the unlikely event they get only one offer, they aren't likely to counter. Banks don't want to own houses. They want to be rid of them.

Kaffine,
If you want to play ball with the banks, there are rules to follow... I hate them too, but because in the past, pre qual letters were so easy to get, they want to make sure that the Buyers are really good to go. You do not have to use them for the actual financing though, just for a pre qual letter. Also, it does inform them of your assets, but in no way does it inform them what you are willing to pay! Do not ask to be approved for a dollar amount, ask to be pre approved to purchase this particular home. My lenders know better than to put a dollar figure in the letter... thay just put in the address of the property instead.
Also, a lot of the times, the lender with the REO will give discounts on the financing if you go with them... if you decide to do this, let them know upfront... this goes into their decision making.
good luck.

bank wants bidders to apply with them for mortgage to buy the house...they want a closed pool of bidders is how I saw it
I would not say that is conflict of interest but the bank is holding the cards, in this case--ownership of the house