In this day of multiple addenda, additional disclosures, and mandatory reviews, there has been one interesting side-effect that restores some of my faith in humanity.
More often than not, verbal negotiation is employed as a means of expediting acceptance of an offer. And while verbal commitments may or may not be legally binding, the trend seems to be leaning towards honoring verbal promises.
The result is significantly less time expended achieving a meeting of the minds. In this day of instant communication and the “I want it now” philosophy, this is a great way to keep all parties “talking!”
However, once the deal is ratified, it’s important to get all of the I’s dotted and T’s crossed as soon as possible.
Because the written contract is still the embodiment of the transaction, and it alone remains as the instrument of enforcement should anything go awry!
Point of clarification: Typically, the initial offer is in writing with earnest money collected, and proof of funds or a pre-approval letter in hand. If the deal is "workable" to the offeree the verbal negotiation is utilized during the countering process. However, all offers, including verbal ones, should be presented!
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Meeting of the minds and the details of the deal hammered out, chiseled on that slate, bullet proof purchase and sale agreement. Time is money and if a broker delays in the back and forth, one side of the other misses the serve, drops the ball.
Hi Richard,
We generally find that most people honor their verbal promise, but we do save voicemails, take notes of conversations, and get contracts initialed off as soon as possible to make their word legally binding.
~Lisa
Richard, I am with Lisa above, I do find that most people are good for their word, however I keep all voicemails, emails and any communication regarding the transaction. I also keep those notes for some tiime after the transaction closes
Richard, I am with Lisa above, I do find that most people are good for their word, however I keep all voicemails, emails and any communication regarding the transaction. I also keep those notes for some tiime after the transaction closes
Andrew...
And let that "chiseled slate" cure any case on amnesia later! Thanks, my friend.
Lisa...
And don't forget that we need to keep OUR clients on track when making a verbal counter-offer too. It's not always the "other" side that tries to change history! Thanks so much for a great comment.
Gerry...
I wonder how enforceable those communications are, other than CYA or as useful memory joggers. I still save everything too though just in case. Thanks so much and have a great day.
So far I have avoided negotiating verbally and that's only because I'll drive to the ends of the earth at any daylight hour to get a signature.
Not that it's easy. It's not. Far too much is done verbally without any sense of involvement of the parties involved.
I am also of the opinion that this trend, which is now fairly well established procedure, is spawned by laziness on the part of the agents involved.
Richard, here in MA once an offer is under consideration we negotiate verbally until terms are agreed upon. Then, rewrite the offer and get signatures on both sides. I've come to enjoy the negotiating stage. But yes, at the end of the day, in Real estate if it ain't in writing, it ain't Real!
Verbal negotiations should never replace written contracts. I never negotiate an offer on one of my listings, until its in writing. Once receiving it, I am guilty of negotiating counter offers verbally but once verbally agreed upon, I get the signatures from all parties that same day. Same on the buying side, I will write up and present the offer, negotiate verbally, and then make changes to the contract, immediately have contract initial changes and signed by all parties.
I have on a few occassions, been asked to put a counter offer in writing before seller will consider it and, of course, I have obliged.
Here in Arizona everything has to be in writing to be a legally binding contract. However, you will find people still doing verbal negotiations. I think that will go away with time though. We never present a verbal offer though. If the client is serious, they will sit down and put it on paper.
I would that after the first written offer is made the majority of the negotiation is done verbally.
I always instruct my students to advise their clients while they are in this verbal negotiation state it is not a deal until everyone signs.
Richard, here in Maryland, it must be in writing to be legal. Though verbal discussions/negotiations certainly do happen, (and I find that they generally HELP!), all the terms agreed in conversations and voice mail message are irrelevant unless written & signed by both parties.
Richard, I have used verbal nefotiations a lot for years. Living in an area where the seller and buyers may live 3-4 hours apart...it has saved alot of time. But, once the deal is agreed upon, hard copy is a must ASAP!
Richard,
I'm in the "written offer with proof of funds" camp. Once that is in place, I'll gladly do counteroffers verbally and get everything signed just as soon as there is a meeting of the minds. Have had agents tell me they don't want to waste time writing up an offer if it won't be accepted; I view that as my job, not a waste of time.
I think it's great if negotiations can be done quicker with less frustration, then get it in writing ASAP.
Richard, once we have a written offer we often will do some verbal back and forth until an agreement is reached. Very rarely will we start out with a verbal offer from scratch.
I would never start out with a verbal negotiation. Representing the seller, I would need to have a written contract with all the addendums, then on a case by case basis, and with the approval of the seller, I would consider verbal negotiations through the use of emails so that things don't get lost in verbal translation.
So true Richard, written is the rule. Too bad the days of the 'handshake' being the rule are gone!
Nope, not in this office, we don't present an offer or a counter without signatures, not to our sellers, not to our buyers and not to another company. NOPE NOPE NOPE. Early on in my career I did it once, and the buyer backed out of his "my handshake is my bond" offer and my broker chewed my butt up and spit it out and I learned put your John Hancock and your EM check where your mouth is and haven't allowed a SINGLE verbal offer in the past 15 years.
To all....
First of all, the unilateral offer is typically in writing and earnest money is collected before bilateral "negotiation" begins.
The COUNTER process is now conducted verbally in the majority of cases.
However, all real estate agents are obligated to present all offers, including verbal offers. Parol contracts are legal in GA, but that's not the point of this post.
In our area on our typical sale, we will not receive a fully executed contract for up to two weeks ... depending on the seller's workload.
Most REO owners want to see proof of funds or a pre-qual letter and some price to get the ball rolling. The most common items that are negotiated verbally are price, seller's contributions and the closing date.
Gabe...
Your scenario is exactly what the blog post is about ....
And when I represent a conventional seller and I get an initial verbal offer that sounds good enough to work with... I will have my SELLER prepare a written offer and send it to the potential purchaser's agent! Why not? In any case, I phone or email my clients with the verbal to see if they choose to pursue it.
Richard: Verbal seemed to become an absolute necessity when dealing with REOs. If they didn't use verbal negotiating, nothing would ever get done. The paperwork can take one full week to get back once you've got a verbally accepted deal.
Chris Ann...
Without verbal countering, the average deal would take over a month to negotiate!
To all...
Also, if a buyer or a buyer's agent calls and asks:
"What's the least your seller would take?"
That is not an offer. However, if the buyer or agent says something like:
"I would give $100K" in cash for that house at 1313 Mockingbird Lane and take it as-is"
That is indeed an offer and should be treated as such!
And if after presenting the verbal offer to the seller, the seller says:
"Tell them to put it in writing."
You have satisfied your obligation to present, and then you verbally "negotiate" by telling the buyer or buyer's agent to put it in writing!
Richard, I do like countering verbally, but I always follow up with email, just to have a record. And, of course, once we all agree...nice clean contracts are in order.
There's more paperwork than ever before so, it's interesting and true that a lot of verbal negotiating is now the norm.
I wouold agree with others that after the initial offer is written a lot of verbal countering is going on. FOr the most part that works...occassionally it doesn't but it usually gets taken care of in the written offer. And as some one said...a lot of the REO companies are doing the counters verbally! THen the contract is re-written with the countered items! Pretty smooth as well!
Great post, Richard. I am ok with verbal negotiations, but I get it in writing in either a counter offer, or an addendum, after the fact, so all parties by signing agree, and there's no misunderstanding later.
I'll thank the asset managers and banks for this. Most prefer to negotiate by phone once the initial offer has been presented. Signing only after all substantive terms of the contract have been agreed to verbally.
We present offers in writing initially - with a check and all disclosures signed. All negotiations after that are verbal until the price has been accepted by both sides. Then the changes get initialed.
That's the norm for this area. However, what is a no-no is trying to negotiate without first presenting something in writing. My first broker used to say: "A verbal negotiation is not worth the paper it's not written on."
This has to vary by locale I would think. We seldom consider anything not submitted in writing, but once that is done it is verbal until we draw up memos.
my reasoning for doing verbals more often than not, is that the contract fades so much with every faxing in a short amount of time it is not legible.
offer must be in writing with pre-approval or verification of funds. Negotiated verbally, finalized in writing (usually by me) and signed by all parties
There's a lot more of that, I'm finding, with REO's.
I have noticed it among counteroffers. You spend two hours meeting with a client including travel time only to have the other agent call you back 5 minutes later with another counteroffer. It comes down to best use of time and keeping the negotiations moving. You would be in your car all day getting useless documents signed, not the best use of my time. Now if it is going to be your best and final offer, I would absolutely send that in writing.
Richard:
Sometimes verbal is the only way many local agents communicate in the San Diego community-via voice mail, etc. Too often, time is of the essence and if verbal communication is not used a deal could go south in a hurry.
Verbal negotiations make me very nervous, since I don't want MY client to ever be left holding the bag of what they thought was a deal, only to discover that another offer came in or another listing came on the market - & since we did not yet have a legally binding, written contract, the other party is free to go on their merry way. Not to say verbal counteroffer negotiating never happens, or that most people would lightly go back on their word - but just sayin'. I would sure want my client to be fully, totally aware of the risk they run until everything is in writing...
Richard - I have used verbal counters for many years without issues arising from this. Today, I was very pleasantly surprised to get a house under contract for some buyers of mine. There were 2 other competing offers, and one of them was full price (like ours). The other agent told us we had a deal, then heard from one of the agents about them raising their price as well. He honored our agreement, and told his client that they had a "moral obligation" to do so.
I was impressed.
I would name him publicly (because he's on AR, too), but I don't have his permission to do that. Thankfully, their offer price was the same as ours, not higher. Needless to say, however, the other agent was not happy with the turn of events, but that is to be expected when there are multiple offers.
Hi Richard -- Exceptionally well said! The thing that still drives me crazy in this day in age with instant communication and technology is how many times a sheet of paper hops around the fax machine, both shrinking it and degrading the quality, to the point of not being able to be readable by the time it's all said and done. It still boggles my mind on how many agents cannot use a scanner and know about things like black and white, grayscale, resolution, etc.
We have one agent that will not accept any kind of verbal offer. He/she makes them him/herself all the time, but will not accept them. But, especially if the offer is unlikely to be ever accepted, rather than do all of the documentation, I prefer to see if the main items are acceptable to the seller. If not there is no reason to go further. Often here in Florida the owners are back up north and to fax back and forth is cumbersome to say the least. And frequently we are dealing with customers who are not tech savy.
I do, however, stress to the buyer/seller that in Florida unless it is in writing, the Statute of Frauds makes a verbal real estate contract about as valuable as a dead frog in the road. I tell them that until both parties have signed or initialled all parts of the contract, either side can decide to kill the deal or accept a better offer is one should appear. (Funny how some agents do not know that).
But, verbal negotiations can be an efficient way to see if it is worthwhile to proceed with a full written offer. Especially in this less than hot market.
I may be a old skooler but if it's not in writing it doesn't get done.
We may have passed the era where a handshake was good enough for a contract, but why not act that way anyway, and then produce the paper to back it up.
Richard - After I get an email verifiying that the original contract was received w/ a copy of the earnest money and letter of credit, I use verbal negociations as an effective way to finalize my contracts. Once done the cleanned -up contract is signed by both parties and we are on to the next level. But verbal offers without paper are worthless. I understand your point of this post and use this method for most of my transactions. Perhaps I have been exposed to many ethical Agents that work well with others
so true what Joe says above, it needs to be in writing!
It's worth nothing if you don't have a signature.
Patricia/Seacoast NH
Ah, but it is definitely worth nothing if you ignore it. A verbal is better than no offer at all, because it has a chance of a successful close. Even a written offer can be withdrawn any time up to acceptance/
Also, a written offer is extinguished upon ANY counter-offer.
I hadn't thought about it before but you're right... there is a lot of verbal negotiation going on.
I have used this on more than one occasion. When we had a deal that worked for everyone, we put it in writing and the closings when off without a hitch.
Richard,
I take exception to some of the comments above. I had one case where I had a lowball offer. I negotiated over the phone with my client and the other Realtor and came up with a workable price, THEN got the counter in writing. 96% of list. Wasn't laziness; just saving a lot of time.
It is a waste of time, paper, electricity etc etc and overall bad for business as well as mother earth to not counter and negotiate verbally. I have some agents in my area that refuse to do so. Every time a counter is made they print the contract, mark it up, get initials and send it over. Most of the time, not even close to where my folks want to be.
Once you get a written offer, verify escrow and approval letter why not bounce it back and forth verbally? Sure its not legal til it's in writing. Sure the other party can go back on their word. 98% won't though because they want they deal they have reached!! If they walk..you never had a deal anyway and you are probably better off. Is this a screening of sorts?
I'll also add, I think that by not negotiating verbally you loose some deals. Some people might take it as the final word and walk away from the deal and find another house. If it's your listing, did you do your clients justice?
Good morning Richard,
Great topic you have brought up! Lane has made some valid points and after all if it is your listing are you doing justice to your clients by not keeping the dialoggoing? I expect to see an offer in writing accompanied with a pre-approval letter. If we are a good distance apart we may want to verbally give it a go and then get all agreements on paper and initialed immediately.
Richard, verbal communication does cut corners; however, I've found that sometimes talk is cheap. It pays to get everything in writing.
yes....we have been negotiating more by phone and email instead of to shipping the voluminous paperwork back and forth each time.
Richard, I have negotiated verbally for the majority of my career. I have found that especially when making low ball offers it is less offensive!
I did it once on a repair request on a deal in which the agent was the owner of the property and she ended up going back on her word! I learned my lesson and will NEVER, EVER do it again. I'm with Lenn, I'll track you down to the ends of the earth to get your John Hancock on the dotted line.