Real estate tip verbal and written offers
Quite often, we are asked by a potential Buyer whether the owners will consider a verbal offer. Many owners prefer to avoid such offers, and in fact, we confirm with all our clients prior to listing, of their instructions to only deal with written offers –being those offers via the fully and correctly completed offer documents. (the difference between an offer and a contract here)
Insisting on written offers isn’t just to benefit the Sellers. It is very much a benefit to the Buyers too.
So why would a Buyer want to only offer verbally in the first place?
This could be for a myriad of reasons. The Buyer may be looking at several homes and doesn’t want to ‘commit’ a written offer to one only, so they are in fact playing the field to see which homes comes out cheapest. The Buyer may be lazy and simply can’t be bothered sitting down with the Agent to complete such.
Or people wanting to negotiate verbally to uncover the owner’s final position only to pass that information onto the true Buyer, who then offers under that again. Or it can simply be the Buyers have no idea of the offering process, and so it is due to ignorance rather than gameplay.
The issues with verbal offers are that they have no terms and conditions and are not binding. And it is this reason that verbal offers are of no benefit to either Buyers or Sellers.
At some point, the verbal offer must be formalised in a fully completed offer document with all the details of the parties as well as terms and conditions. What happens if one of the parties now renege and try to re-negotiate?
For example, a Seller may be under the impression the price agreed was with no conditions such as a building and pest clause. The Buyer wants that clause as a protection. So now the Seller insists on a higher price to include such conditions.
Or consider another scenario where a Buyer replies to a Seller saying they need a 60 day finance clause. The Seller would not have expected that and would not have agreed to such, but again these details were not discussed. These scenarios illustrate why verbal offers are fraught with danger.
Buyers need to consider another point.
A seller will always take a Buyer’s offer more seriously if they have completed the appropriate offer documents.
Imagine being a seller, with the Agent sitting across the table, laying out the formal offer, signed and fully completed with the price and all the other details such as deposit, terms and conditions, etc. Now imagine the Agent ringing a Seller saying, ‘Hey John, I have a guy here wanting to offer $XXX, what do you want to do?”. Which do you think would hold more value to the Seller and which offer do you think the Seller will more likely negotiate seriously?
As a Buyer, you must remember the Sellers do have fears and trepidations just like Buyers. The more comfortable you can make the Seller, the better they will view your offer in negotiations and may even have leniency – that is why written offers are a must. If you make a verbal offer the Seller will always ask why – are they not serious. Verbal offers are far too easy to dismiss.
So, it is clear to see why it is in both the Seller’s and Buyer’s benefit to take the time and complete the appropriate formal offer documents.
Written by Shawn Kristofer