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Written Offer is the Only One That Counts in Real Estate - 2009-01-18 |
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WRITTEN OFFER IS THE ONLY ONE THAT COUNTS IN REAL ESTATE
It happened again last week and I couldn't believe it. A fellow broker called me to lament his bad fortune in the world of real estate. It seems he had located a home for sale near a rental house he already owns, and he thought this would be a perfect little house to add to his portfolio.
He called the owner, toured the house, and made a reasonable verbal offer to purchase it. The owner said he wanted to think about it, and told my friend to call back in a week or two and he would be ready to decide.
A week later my friend drove by the house, and noticed a competing real estate company sign in front of the property, topped by a "sold" sign. When he talked to the owner, he was informed that another real estate agent had made an offer which the seller decided to accept. After closing, it became public information that the final selling price was less than my friends original offer for the same property.
It turns out that the seller had not taken my friends verbal offer seriously. But when he was confronted with a formal written offer for a specific cash dollar amount with a specific date of closing, he was finally persuaded to accept the offer and officially "be done" with his selling ordeal.
It is important to note that Georgia law requires any agreement for the sale of real property be in writing in order to be enforceable. In other words, a verbal agreement to buy a house is not worth the paper it's not written on.
I believe that any serious negotiation to purchase real property should begin with a written purchase offer. If nothing else, the filling out of the form gives you time to "crystallize" your thoughts. And the written offer produces a variety of benefits:
* Filling out the offer form demonstrates to you that the document is nothing more than a series of sentences with blanks that need to be filled in with something. If nothing else, going through the motions of filling out the contract serves the purpose of lowering the intimidation level and making you feel more comfortable with what the document says and means.
Some home buyers go their entire lives never truly understanding the terms of the purchase and sale agreement. They properly place their confidence and trust in a highly trained real estate professional, but they yield the knowledge of the contract document to their surrogate. They allow the agent to finally say "sign here" and blindly hope all will go well.
Unfortunately, while many agents are extremely familiar with the words of the forms and the pre-written addendums, it must be remembered that real estate agents are not licensed to practice law. As such they are forbidden to construct contracts or to offer advice as to the meaning or effect of these documents.
* Presenting the seller with a written offer brings more power to the offer itself. Because it is in writing and because it carries a specified dollar amount and a sum of earnest money and a buyer's signature, it is perceived by the seller as "more serious" than a verbal offer, which can be denied or "mis-remembered" later.
To put it another way, the seller may feel that your verbal offer is noting more than idle chatter. A lot of people say a lot of things. But here in his hands is a solid offer to purchase, with all the details hammered out. If he simply signs his name on the dotted line, the seller now has a realistic expectation of achieving his goal.
* Using a written contract carries with it another benefit. It almost guarantees that there will be less, if any, confusion among the parties as to what is supposed to happen and when.
A well written purchase and sale agreement makes provision for a limited period of inspection, after which the purchaser must either withdraw or confirm his intention to purchase. It may address the issue of the purchaser's financing, which is of high import in this market. It covers all the important points like price, terms and date of settlement.
But it also details all the mundane matters. Who gets the window blinds and who pays the property taxes for the year of purchase. When do the keys actually change hands? What responsibilities, if any, does the seller have after settlement occurs? And what happens if there is a leak in the roof the day before closing?
I know these sound trivial, but they grow to massive importance when they occur, and any one of them can literally derail an otherwise ideal property transfer.
* One final reason to avoid a verbal agreement is this. In a market such as today's, many sellers are frustrated that their home has sat unsold for so long. And the act of signing a written agreement literally "starts the clock ticking" from the moment the contact is signed, sealed and delivered.
That moment is called the "Binding Agreement Date," and it marks the beginning of all time allowances within the agreement. They include due diligence, inspection, title examination, loan approval, and literally, the day of settlement itself.
As always, I recommend that you make any offer to purchase real estate contingent upon review by your attorney, so that you have time to obtain appropriate legal advice.
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