What are the pros and cons of verbal real estate offers? Today we bring them to you.
As the Listing agent, you get to call the Seller who is anxiously awaiting to get an offer. That is the only pro for Listing agents. Yet, don’t let it backfire on you. Read below to learn more.
As the Buyer’s agent, writing up an offer can be a time-consuming process, (there is the initial contract along with the addendums,) especially when the Buyer wants to offer a price much lower than you think the Seller may accept. After all your hard work, the Seller may balk at the offer and not accept it. So, you may think, “why not just ask the Listing agent before writing up the offer?” Sounds a lot better than wasting your time, right? Think again.
Buyers mostly focus on price at first when making their initial offer with the Seller. Most of the time, it is not just about the price. The purchase offer often encompasses terms and conditions that may or may not be acceptable to the Seller.
It’s a complicated legal document. Many rounds of discussions may take place, and then nothing may become of it. When it is in writing, you can keep clearer track of all the elements of the transaction, whether it results in a sale or not.
A real estate Listing agent received a text for a property she had on the market in North Miami Beach, Florida. The text from the Buyer’s agent read, “My client wants to offer _____ cash on the above property. Please advise.”
The answer from the Listing agent was, “Please put it in writing and show proof of funds.” Did she ever hear back from the Buyer’s agent? The answer is NO.
When the Listing agent followed up with the Buyer’s agent, he said that he could not reach the Buyer, which is why he never responded back. The Buyer had disappeared. He had ghosted. The term may be familiar to those who are dating, yet isn’t working with Buyers also a form of courtship until the transaction is completed?
Imagine if the Listing agent had made the verbal offer to the Seller and the Seller said ok, only to find out that the Buyer disappeared. Think they would be happy?
A week later, the same Listing agent for the above property received a text from another Buyer’s agent. The text read, “Buyer just saw unit and is thinking about renovation costs and would like to offer your Seller____. I do not want to waste my time and yours. Please present this verbal offer to Seller to get the process started.”
The Listing agent’s answer was still the same, “I don’t accept verbal offers. If your client is interested, please present a written offer.”
Then the Listing agent did what’s a growing rarity in the real estate business: she picked up the phone and explained how it would benefit all parties to present the offer in writing, and the Buyer’s agent agreed. The offer was presented AND accepted by the Seller.
Who wants to waste their time? No one. Especially in today’s world. That’s why presenting written offers is a vital part of the real estate business.
6 Cons To Accepting a Verbal Offer As The Listing Agent
With no written offer, there is no proof that the Buyer did make an offer. If the listing expires, and the same Buyer makes an offer on the property, the protection period in the agreement may not protect your commission.
Remember, there are cases when Buyers try to go behind the Listing agent and present an offer directly to the Seller when it is no longer listed. The normal protection period in a Listing Agreement is up to 180 days. (May vary by state). Without a written offer, if the Buyer makes an offer months later, you may not receive any commission for all your hard work.
If the Seller verbally agrees to a price, the buyer may re-think the offer and submit a lower offer. The thinking process sometimes goes like this, “If they accepted my first offer so quickly, maybe they will accept this one, which is a little less.” The Buyers threw in the initial bait hook and are now fishing again.
The verbal offer gets accepted and the Seller is elated. Then…nothing happens. The buyer changes their mind and loses nothing because there is no written contract and no deposit.
When the written offer does not follow the verbal offer, the Seller may begin to doubt the legitimacy of the offer. If the Seller has any doubts about your efforts to sell their property, this will solidify it. And if the listing is set to expire soon, they may think it is a ploy for you to keep the listing. Also, if a Seller is uncomfortable with you in any way, this may set them off to fire you.
Verbal offers usually don’t consider all the important details as noted in the contract. Price is just one of the important elements of a contract. The type of contract being presented is important, as well as the following terms and conditions: inspection period, earnest money deposits, whether it is subject to appraisal, closing date and much more. All terms and conditions can be clearly defined when the agreement is placed in writing.
It is crucial to keep in mind that verbal agreements to sell real estate aren’t legally binding. To be legally enforceable, a contract to buy real estate must be in writing, agreed to, and signed by both Buyer and Seller.
The advantages of a verbal offer are very small. The Seller is at a disadvantage with verbal offers, as well as the real estate agents involved in the transaction. Be sure to consult your association’s legal hotline to make sure you have a binding contract or ask any other legal questions you may have. Your association’s legal team may advise you that no one should ever use a verbal offer because of the high legal risk. It shouldn’t even be considered. Be sure to follow their recommended best practices.
Yes, there are many demands made on your time as real estate agents each day. But remember, without a written offer and deposit from your Buyer, there is no skin in the game and there’s a lot of risks. Stay fresh, focused and professional by following the above tips.
Written for Form Simplicity by Janice Zaltman, a Realtor, LEED AP, Marketing Coach and Writer with more than 20 years of experience in the sales, marketing and media fields.