"A Verbal Approval Is Not Worth The Paper Its Written On"... Or, "Just 'Cause You Say It, Don't Make It So"

By
Real Estate Agent with I.V.P.G. - Inland Valley Professional Group

Hi All,

Don'tcha just love the English language and all the colorful ways folks use it?  Boy, I sure do, and I am especially enamored of the way that some folks truly believe that by merely speaking the words they can "wish" things into being.  I always knew "Abracadabra" was a magic word that could make things happen merely by uttering it, but I had no idea that "Approval" was similarly endowed.  I know that where Short Sales are concerned, this is a powerful word and one everyone involved in the transaction longs to hear.  Once "Approval" is uttered a whole lot of things should start happening unless...

They don't mean "Approval" as in "We have, in writing, authorization from the lender and the owner of the property to proceed with the Short Sale at the amount offered for purchase." 

They mean "Approval" as in "We got someone on the phone once at the bank and they said that the bank has been known to do Short Sales, but didn't actually commit to anything, still we are pretty sure that they will, so we are going to advertise that they did, and then hope that they do."

I just ran into this situation and was sardonically amused to find that the second scenario was what was occurring.  Silly me, I really thought that these folks understood what "Approval" meant, especially because they advertised their listing as having "Full Approval - No Need To Wait For The Bank". (And when I spoke with them, they reiterated this.) No need indeed! 

Turns out that all this agent had was a "Verbal Approval" to proceed but there was nothing on paper, save what they had written in the MLS, that in any way was going to make this so.  The funny thing is that these folks bill themselves as "Short Sale Experts". 

I should have been tipped off that something was amiss when I received a form letter response to an offer touting their success and experience in handling these transactions accompanied by a xerox of a xerox of an unsigned and undated counter asking for things we had already provided. 

That was it, two lonely little pages... and nothing else.  No initialed RPA, no nothing.  (Actually, I was tipped off and I shared my reservations with my client.)  I am left to surmise that their "Short Sale Expert" status was worth as much as the "Verbal Approval" they have to proceed.  As for the response we received to our offer, I must say that I was further amused, when I queried about the unsigned paperwork and lack of response from the seller, to be told that they "Always just send the offer straight to the bank and only have their client sign it if the bank accepts."  Well, just because you "always" do it, doesn't make it right. 

And what happens if the bank says "yes" but the owner says "no"?  You can't cut the owner out of the deal, after all it is still their property and they have the right to do, or not do, as the case may be, with it what they will.

Folks, just because you say it don't make it so.  And no amount of magical thinking will ever replace a nice, solid payoff statement written on good old paper.  And if you don't have a solid understanding of what constitutes a binding offer (and an unsigned counter sure ain't it) or how a transaction of any type works, perhaps some time spent reviewing basic Real Estate Principles might be in order. 

When it comes right down to it, I have decided that some folks really want to live in a Fool's Paradise.  As for me and my client's, we prefer a real home in the real world.  So, our search for the perfect home continues*.

Take care all, help lots of people and have a wonderful day!

Tisza

Be sure to check out my blog:

http://Route66Living.com/

  *My client is preapproved FHA and AmeriDream and we are looking for something under $310,000, built in 2000 or later, 3+ beds, SFR, Townhouse, Condo or PUD with a pool.  He's open to anything that is within easy commute distance to a Metrolink Station from Los Angeles to Riverside.  If you have anything that fits, please get in touch.

 

Comments (17)

Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Both in foreclosures and short sales, a verbal approval means the asset manager will send it to the boys (and/or girls) in the boardroom for real approval.  And even then they have the right to look at other offers until they sign the contract. 

Aug 20, 2008 11:47 AM
Anonymous
Bridget Langkamp

I just want to say...

"AMEN"!!!!

We do this day in and day out and you hit the nail on the head!!!

A verbal agreement ain't worth the paper it's written on...

Aug 20, 2008 11:51 AM
#2
Elena Martinovici
MY HOME GROUP 602-321-1273 - Phoenix, AZ
Associate Broker- Phoenix , Arizona

Agree with the post !  Just made an offer on one of these. Agent told me she has paid a negotiator to do this.  Told me she has sent the offer to him for review and will send it to the bank , how about the owner? We want his signatures first and a copy of that back to us.  The short sale addendum takes care of it if the bank does not approve. I told  her she must have owner sign everything first , she is acting like she knows how is done but .... .we will see.  I also told her to obtain a HUD statement  that shows what goes to the first and what goes to the second etc.... Bank like to see the bottom line ,.

Aug 20, 2008 11:52 AM
Elena Martinovici
MY HOME GROUP 602-321-1273 - Phoenix, AZ
Associate Broker- Phoenix , Arizona

Send them to  Phoenix . I will get them that house for 1/2 the money .  :) 15 minutes from down town.

Aug 20, 2008 11:55 AM
Kerry Jenkins
Prime Properties - Crestline, CA

I had a similiar situation, that had me cracking up.  This couple went and saw a home on their own since they were just driving by and the owners were out front.  Walked around, loved it, talked the owners, said they wanted to make an offer right then and there, they'd offer this and the seller said he'd take that.  They shook hands.  The seller (my brokers client) just happened to sign acceptance on another offer and escrow opened that morning, while the folks were still touring his home.  The lookie-loos went down the street to another real estate office, and the agent calls up and says she has an offer, though the seller and buyer had a verbal acceptance and she was submitting paperwork as a formality.

HUH?  I told her that the home had opened escrow that morning.  The agent said that couldn't be so, since the seller already agreed to sell to her buyer.

OK, so I referred her to my broker, who told her the same thing.  She still hand delievered the offer, with a cover sheet stating about how the seller and buyer had already done a "good as gold" handshake on the deal.

Obviously, that buyer didn't get the proeprty, since it was already in escrow, but I just couldn't believe the agent telling me that we couldn't have an escrow, since the seller agreed to sell it to her buyer...

Aug 20, 2008 12:18 PM
Anonymous
Jackie Nary

Thank you for your frank and accurate description of a short sale nightmare.  Been there, done that, don't want to do it again...........

Aug 20, 2008 01:12 PM
#6
Mary Pope-Handy
Sereno Group Real Estate - Los Gatos, CA
CRS, CIPS, ABR, SRES, Silicon Valley

Ouch, ouch, ouch.

I wasted 2 months of this year (Jan/Feb) trying to do short sales in which everyone wanted to sell but the banks just refused to even wake up and look at the offer. SO different from 1993-1994, when I did a couple of these and it was only difficult, not impossible....

Wishing you smooth sailing from here on!

Aug 20, 2008 03:28 PM
Tisza Major-Posner
I.V.P.G. - Inland Valley Professional Group - Claremont, CA
DRE#01784679

Hi All,

Gabe - Yes, that is true, but "Approval" as in, we have a complete package and we can send it up the flagpole and see who salutes and "Approval" as in, we have authorization to proceed and will be sending out the payoff statement imminently are two vastly different things :-)

Bridget - Glad you enjoyed it, this has been stewing for a long time and today it finally boiled into a blog.

Elena - Sort of makes you wonder what exactly they are experienced in because from what I can see, in a whole lot of these cases I would swear it wasn't Real Estate.  And, if you can figure out a way that he can commute via MetroLink to his job in downtown LA then I am sure we could work something out :-)

Amy - They didn't? Really?  Even after they shook on it and all... imagine that!  I am sure that there was a time when that would have flown, but I think those deals went out when the Mayflower arrived.  Heck, even the deal for Manhattan Island and the Louisiana Purchase were written down.

Jackie - You're welcome.

Mary - Yep, every time I think the end is near I see a whole new group joining the stupidity parade and the band plays on.  Thanks for the good wishes.  I'm not worried, the right home is out there and I will find it for him and hopefully it will be repped by an agent who CAN find their backside with both hands and a road map.

Take care all, help lots of people and have a wonderful day!

Tisza

Aug 20, 2008 06:16 PM
Jim Frimmer
HomeSmart Realty West - San Diego, CA
Realtor & CDPE, Mission Valley specialist

Same with buyer rep agreements: "Can you just show me these five condos in this building and then we'll sit down and do paperwork." I don't mind working, and I even do a lot of stuff just because I want to, but if I'm going to spend time showing properties, I'm going to do it for a Client: "Oh, this paperwork will just take a couple of minutes and ensures you that I'll be dedicated to help you to the best of my abilities, and those of my office."

Aug 20, 2008 08:19 PM
Ann Allen Hoover
RE/MAX Advantage South - Hoover, AL
CDPE SRES ASP e-PRO Realtor - Homes for Sale - AL

Hi Tisza!  Another great post!  You sure have a knack for telling it like it is!

Have a great day!

Ann Allen Birmingham Realtor

Aug 21, 2008 03:06 AM
Jennifer Monroe
Savvy + Company Real Estate - Charlotte, NC
Real Estate REALTOR®/Broker in Beautiful Charlotte

Before we ever look at a single home, I sit 'em down and explain precisely what they will need from their lender. Whether they are a buyer or a seller, it needs to be in writing. For buyers, that letter in my hand is that only thing that will unlock my MLS key.

Great post, as always Tisza!

Aug 21, 2008 05:13 AM
Tisza Major-Posner
I.V.P.G. - Inland Valley Professional Group - Claremont, CA
DRE#01784679

Hi All,

Jim- I agree with you and I do the same thing.  I tend to operate on a modified drug dealer motto "The first one's free..." so I will take you through as many properties as you want while we sit in my office but if you want to go out and walk through them then it is "Sign here please..." and off we go!

Ann - Glad to hear that you enjoyed it.  I just wish that there was less is to tell...

Jennifer - Thanks, I am always glad to hear that there are more folks out there who play the same way I do.

Take care, help lots of people and have a wonderful day!

Tisza

Aug 21, 2008 07:28 AM
Not a real person
San Diego, CA

Twice this past week I have had Realtors promise me future work if I would just ______________. I explained Politely and Professionally that if we're able to create a mutually beneficial business relationship, then somewhere down the road I would be happy to _____________. It's been my experience, though, that the promise of future work doesn't mean there will be future work, even if I _______________. Others who have gone before have ruined it for those who come behind.

Aug 21, 2008 06:07 PM
Mike Hughes
Mike Hughes Team - Hughes Residential - Newton, MA
Services Newton, Brookline, Lexington, Waltham & W

Tisza,

Great point as many of us become more familiar with shorts and REOs, I think your points need to be taped to our walls.  I think it's easy for agents to forget that "we're" dealing with the corporate environment.  It needs to be on paper, or else it just doesn't count.

I've been involved with a few of these from the buyer side and I've learned that the banks will use every trick in the book to get every last penny -- even if it's not ethical.  As REALTORS, we need to bring ethics to the game to protect our clients.

Best regards,

Mike

Aug 24, 2008 09:09 AM
Tisza Major-Posner
I.V.P.G. - Inland Valley Professional Group - Claremont, CA
DRE#01784679

Hi All,

Russel - There sure are a whole lot of foks who operate under the Wimpy principle "I will gladly pay you Tuesday for a hamburger today".  Didn't work for him... doesn't work for me.

Mike - I agree we do indeed to bring everything we have to the table, our skill our training and our ethics should al carry equal weight but if you have to make a choice, choose ethics over all.  Doing the right thing won't steer you wrong.

Take care all, help lots of people and have a wonderful day!

Tisza

Aug 24, 2008 01:01 PM
Jennifer Mallory
Keller Williams Hudson Valley Realty - Nyack, NY
Nyack NY Real Estate Broker Associate

Scarily enough, commitment letters aren't necessarily a guarantee, either. Just last week my colleague represented a buyer who had received a commitment from a bank about 4 weeks ago. Four days before the closing, the bank pulled the commitment to "review" it b/c the buyer was no doc. Fortunately, the closing was back on track the following day, but it was a nervous 24 hours for everyone involved in the deal.

Aug 26, 2008 12:03 AM
Tisza Major-Posner
I.V.P.G. - Inland Valley Professional Group - Claremont, CA
DRE#01784679

Hi Jennifer,

Wow, that would have had me quaking in my boots as well.  Isn't it amazing what blind panic (like some of the lenders are experiencing) will do?

Thanks for stopping by.  Take care, help lots of people and have a nice day!

Tisza

Aug 26, 2008 02:28 AM