After showing a house I am listing I received a verbal offer on the property. The buyer insisted I present his verbal offer.
As a seller, there are few things you need to know about verbal offers. It is important to know why you should slow down and insist the offer is in writing. Here in Massachusetts, an offer is a loose term. A home buyer usually submits a contract to purchase. Along with the contract the buyer will also submit any supporting documents like a pre-approval or proof of funds.
Seller Beware of Verbal Offers
With verbal offers there are usually a ton of details missing and those details could be important in making negotiation decisions for the seller.
Buyer’s will often say I don’t want to waste time if they won’t accept X amount….. ask the seller if they will accept it. There are many things to consider when you are thinking of accepting an offer and following are some of the things to consider:
- Closing Date- Does the closing date work for you? do you have to spend money on temporary housing and storage you were not planning on?
- Financing- How strong is the financing? Is it a cash deal or is the home buyers financing dicey? What risks are you taking?
- Contingencies- Again, it is about risk. How much risk are you taking in the deal. If you are taking absolutely no risk you may be willing to give up some money and vice versa. A common contingency is a house to sell contingency. The sale is predicated on the buyer selling their current residence by the time they close on your house.
In the case of the verbal offer this weekend, the buyer said it was a cash offer but when it came time to put it in writing their was a house to sell contingency. That really changes the negotiation dynamics for the seller. Verbally agreeing on a price predicated on it being a cash offer with no contingencies could make the seller willing to settle on a price more condusive to the buyer and they could be tipping there hand in future negotiations.
As always, I recommended to the seller that they should thank the buyer for the offer but they are only reviewng offers on the Standard Massachusetts Contract to Purchase
Verbal Offers are Legal but not Binding
Every state is different and you should be aware of state contract law. Here, in Massachusetts, verbal contracts are legal but not binding. Meaning, if it is not written int the form of a contract it is not enforceable.
Should a problem arise in a verbal dispute and it went to court the judge would most likely not make a ruling as there would not be sufficient evidence with a verbal offer. Massachusetts state law specifically states that a contract for real property needs to be in writing.
Now you need to be especially careful about electronic communications. Say an offer is tendered verbally but then subsequent follow up is by text or email a contract could be considered legal and binding. Here is a recent article discussing the validity of electronic communication being construed as a legal and binding contract.
A Real Estate Agent is Obligated to Submit All Offers
All offers must be submitted to the seller by a real estate agent, irregardless of its delivery. It could be a contract, written on a napkin or verbal. It makes no difference, it must be submitted promptly to the home seller.
But, in your haste, don’t get excited.
Refuse to negotiate any offers that are not on a standard contract to purchase with required supporting documents. What may happen is the buyer may forget a vital piece of information about the offer and you could end up tipping your hand to what you might accepts. Also, if you are excited about the verbal offer you may ignore other offers that are actually valid.
To re-iterate my stance, I always recommend to sellers to not negotiate verbals offer and insist on a formal written offer with supporting documents. Once signatures are applied to a properly written contract, the contract becomes a legal and binding instrument that can be upheld in a court of law. Buyers will also think twice about disclosing important details as they are again singing a binding contract they can be held to.
The Verbal Offer- Seller Beware, has been written by Kevin Vitali of EXIT Group One Real Estate. If you are thinking of selling a home learn why Kevin’s market plan gets your house sold and how an agents experience is important in completing the transaction.