Why we don’t rely on ‘verbal’ offers….

Years ago as a young real estate agent I had a great boss who reminded us all that an offer was never an offer until it was on a contract. He also used the line “strike while the iron is hot”, and while these were good pieces of advice for selling agents, they are ingrained in my memory and apply to my role as a buyers agent for every negotiation.

We can never rely on a verbal “yes”, nor can we be confident that we have secured a property until the contracts are signed. Even when the trust level is high and the dealings I’ve had with the agent in the past have all been positive, we cannot assume that a vendor or out-negotiated buyer won’t change their mind. When I call a client to update them with the happy news, I offer them this same advice and remind them that it’s not official until it’s signed;

“You can crack the Yellowglen, but not the Bollinger.”

I remember a hard lesson in my first few months of real estate agency work back in 2003. I had a delightful older couple I was working for who were selling their family home of 51 years in Hampton. They had proudly raised six children in this tiny post-war brick co-joined house and they were moving to a retirement village. Jim asked me if we’d be able to achieve a sales price of $500,000 and I was quite hopeful that I could. 

After a week of advertising and open for inspections I had an overseas client who I’d built a nice rapport with and he was keen to buy into the area. He’d arranged for his best friend to inspect the property on his behalf and he submitted his best offer of $525,000. I called Jim and Elsie and they were thrilled with the offer. They were out at their daughter’s but assured me they’d sign the contract at 7pm so I packaged the multiple copies in the file and booked my appointment into my diary. I gave the happy update to the excited overseas buyer and by this time he’d sent me a photo of his smiling family and heartfelt thanks for making the process so smooth. Half an hour later I had a call from a local builder who wanted to inspect the property. 

This wasn’t what I’d expected. It was 6pm and I was preparing contracts for signing.

My boss turned to me and said gently “CB, you have to take him through. I know you like the buyer but you work for the vendor.” 

And he was absolutely right.

I took the builder through the property then and there, hoping he would deem it unsuitable. While he was wandering through he mentioned that he hadn’t even discussed it with his wife. I told him about my offer and after consulting Jim and Elsie, his instruction was to decide what he wanted to do by 7pm. 

He signed a contract offering $530,000. After gathering my nerves and taking a deep breath I contacted the other buyer. They were devastated. Not only that, they felt misled and reminded me over and over that I couldn’t be trusted. I felt awful.

The lesson stung me and I’ve never forgotten it. I didn’t manage their expectations well at all. I should have explained that the sale is never to be celebrated until it’s official. I should have told him after the builder’s enquiry that I was taking through a late-entrant buyer.

The same applies to purchasing. 

We always ask ourselves what could go wrong in between offer and verbal acceptance. The list is long and could include any number of these possibilities:

• The agent has a late-entrant buyer like I did on the little Hampton house
• Another agent in the agency has a buyer that we didn’t know about
• The vendor changes their mind about how they feel about the offer
• The vendor didn’t consult their partner before agreeing to the price
• The contracts aren’t available yet
• The vendor’s situation suddenly changes (ie. job loss, sickness, separation etc) and they decide to withdraw the property from sale
• The agent’s authority has run out and another agency has authority and a buyer

Likewise, I always remind our clients that if we are making an offer, we make a genuine offer. Genuine means that the offer is on a contract and has a consideration (ie. small deposit).

Buyers use the word gazumping a lot. This can happen through all matter of ways and sometimes it genuinely is outside of the agent’s control. But there are ways to reduce the chances of being gazumped.

Being clear about understanding when the agent is meeting with the vendors, when they will sign and when  the contracts have been exchanged is essential. 

Until then, the champagne must stay on ice.