I’m working on an offer for a buyer on a bank foreclosure. We wrote up an offer. After some back and forth, five days later we got our final addendum signed and returned from the bank, so at that point we were told by the listing agent that we had “verbal acceptance.”

Before I get into what happened next, I should point out that I’m not putting the listing agent in this case down. This agent clearly was being respectful of my buyers’ efforts, and immediately had the listing marked pending sale. The chances are excellent that all the issues I’m describing here will get ironed out routinely. Still, I thought it would be helpful if buyers and sellers had a better understanding of some of the problems that are caused when you start talking about verbal acceptance.

Very often, it turns out that verbal acceptance is every bit as much an oxymoron as “military intelligence” and “fresh frozen strawberries”. First of all, in California, a part of the Civil Code known as the Statute of Frauds says that certain types of contracts (including contracts for real estate) are unenforceable unless evidenced in writing.

So what’s wrong with accepting an offer verbally and then getting the final signatures later?

Several things:

1. Someone inevitably changes something.
   When we finally got the written “acceptance” from the bank (about a week after we got “verbal acceptance”), it turned out that they’d crossed out our close of escrow date and entered a new one, and that they’d changed the allocation of closing costs. Again, I’m not faulting the agent, here. Many times I’ve been on the other end and told an agent that (for example) my client’s offering $300,000, only to submit the offer later for $280,000. Was I lying? No, my client told me $300,000, then later decided instead to offer $280,000. That’s why verbal offers are on a par with verbal acceptance — they’re not worth the paper they’re not printed on, either.
2. When did acceptance happen?
   The other problem that “verbal acceptance” causes is fouling up our ability to date when acceptance happened. This is not a trivial thing, since many of our time frames such as the buyer’s inspection period and the date for close of escrow start when we get acceptance. Traditionally, acceptance starts when the offer and any counter-offers are completely signed by both parties. Enter verbal acceptance, and now you have three choices:
   1. The date of verbal acceptance.
   2. The date you got signatures.
   3. But remember, now, if you got signatures evidencing acceptance, but there were changes scribbled in by the person signing, even on the date in (2) you still don’t really have acceptance, you have a counter offer.
3. Time is Of The Essence
   Banks selling REOs and banks approving short sale always seem to want to get the buyer to move forward on their inspections as soon as possible, but the buyer has to pay for these inspections. Normally, again, we can work this out, but it’s a legitimate area of buyer concern if they don’t have anything in writing from the seller yet, and they have to shell out $450 to $1000 or more on various inspections.

Pay Attention

As always, having an experienced agent or broker who who will carefully review and explain the paperwork at each stage of the process is your best protection. Your agent should be pushing to ensure that all the terms are clearly spelled out in writing as soon as possible, and should have no qualms about pushing back on your behalf if what you get in writing wasn’t what you had agreed to verbally.

To be sure, foreclosure bidding can sometimes be competitive, and the sellers (banks) tend to be slow getting the paperwork done. In that case verbal acceptance is sometimes a nice way to make sure your offer is the one that gets that home taken off the market. But if you do go that route, you should think twice before committing your money to inspections, and your agent shouldn’t open escrow until you have written agreement on the terms.

blog comments powered by Disqus