Pat
The banks do try to eliminate conflicts but some do it better than others. Most now require buyer, seller and both agents to sign a form stating it is an arms length transaction between unrelated buyers and sellers nor is there any deal to let the seller remain in the property. I had a transaction where the seller had the same last name as I did. It is not a particularly common name but was conicidential. I had never met him before and we are completely unrelated in ever way. We had to sign a notarized affadavit to that effect which we obviously had no problem doing.
The problem with keeping the window open is that the process takes a long time and every time a new offer would get submitted they would need to restart much of the process. It would be close to impossible to close most transactions and that would be a net loss for the lender. Not only that, its not how traditional sales occur anyway. When a seller accepts an offer they are bound to that offer even if a higher one comes in the next day. Why should lenders have a different set of rules?
