Negotiating a home purchase can be an arduous process. Drafting the purchase offer can take hours depending on the situation. After all that, the seller may or may not find it acceptable, and modifications may be necessary.
Buyers usually focus on price when they think of striking a deal with the seller. But the purchase offer encompasses all the terms and conditions that will apply if the sale goes forward. It’s a complicated legal document.
Sellers often don’t accept the buyer’s first offer in its entirety. For instance, the seller might like the buyer’s price, but not the date he wants to close the sale. Or, the buyer could ask for possession of the property when the deal closes, and the sellers might need to rent back for a while.
It’s common for buyers and sellers to engage in several rounds of counteroffering back and forth before they arrive at a contract that’s mutually acceptable. This can take days. One way to short-cut the process is through verbal negotiations.
For example, sellers of a Piedmont, Calif., property received several offers. Two of the offers were close to what they were hoping for. Rather than go through the tedium of countering back and forth, they asked their listing agent to talk to the real estate agents who represented the buyers who made the two best offers.
The sellers wanted to know if either or both of the buyers would be willing to pay more in order to wrap up the deal. The sellers reached a verbal agreement with one of the buyers, which was promptly solidified in writing.
HOUSE HUNTING: It’s critical to keep in mind that verbal agreements to sell real estate aren’t binding. To be legally enforceable, a contract to buy real estate must be agreed to in writing by both buyer and seller.
One prospective buyer learned this lesson the hard way. He preferred to negotiate verbally with the seller for the purchase of an Oakland, Calif., property. After several days of verbal negotiations, the buyer and seller reached a verbal agreement on price. The myriad details that make up the entire purchase agreement hadn’t been discussed.
When the buyer finally sat down with an agent to put his offer is writing, other buyers were expressing interest in making offers. One of the other buyers did step forward with a written offer for a higher price that was presented to the seller along with the offer from the buyer who had initially made the verbal offer.
The sellers happily accepted the highest offer, which was much better than the offer made by the buyer who preferred to wait to put his offer in writing.
Buyers and sellers often feel that negotiations about issues that are less significant than the price can be carried out with less pressure on a more casual verbal basis. But, until you have a fully ratified written contract, you don’t have a binding agreement. So, if another offer shows up before you’ve agreed in writing to all the terms of your purchase contract, the sellers may be under no obligation to sell to you.
Even if you’re diligent about committing your offer and all counteroffers to writing, both you and the sellers have the right to withdraw a counteroffer before it has been signed by the other party and acceptance has been delivered back to the party that made the counteroffer. Like in baseball that’s not over till it’s over, your real estate contract isn’t binding until it’s signed by all parties.
THE CLOSING: Be sure to consult a knowledgeable real estate attorney if you have any questions about whether you have a binding contract.
Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.
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