The Housing Scene

Verbal Offers; IRS Agreements

Cash offers are one thing. But when they are verbal, realty professionals agree that they’re not worth the paper they’re not printed on.

A few months ago, Janice Zaltman, an agent with Keller Williams Partners in Hollywood, Florida, received a text from another agent -- who should have known better -- that he had a client who wanted to make a cash offer on a property Zaltman had listed. Her response: “Please put it in writing and show proof of funds.”

She never heard another word, she said in a recent post on real estate site ActiveRain. When she followed up with the other agent, “he informed me that he could not reach the buyer. She had disappeared.”

Four days later, Zaltman received a similar text from another agent. Her response, again, was: “I don’t do verbal offers.”

Writing offers is what good agents do. It’s part of the job description. “Nobody wants to waste their time,” Zaltman said in her post. But “writing offers and presenting them to get accepted ... is part of our business.”

The responses from other realty pros were nearly unanimous. “I totally agree,” said Kristin Hamilton of Keller Williams Realty in Redlands, California. Her standard response? “I will present all written offers to my sellers.”

Added Jeff Dowler of Solutions Real Estate in Carlsbad, California: “If it’s not in writing, it’s not real. Gone are the days of handshake deals.”

In Maryland, reports Buzz Mackintosh of Mackintosh Realtors in Frederick, verbal offers are not binding. Offers there must be in writing to be enforceable. Ditto in New Jersey, said Marna Brown-Krausz of RE/MAX Greater Princeton.

Bruce Kunz of Century 21 Solid Gold Realty in Brick, New Jersey, contended that “if a buyer can’t sign a paper, there is no way to take them seriously.”

Theo Shaw of Baird and Warner Residential in Evanston, Illinois, said, “When the buyer can’t be bothered to submit a written offer, they are not serious buyers.”

Zaltman, who started this conversation, wrote that there are important reasons never to accept a verbal offer. Several are for the protection of the listing agent, but a couple apply to the sellers.

For example, if you agree to a price verbally, the buyer could rethink their offer and submit a lower one. Or, if the offer is accepted and the buyer has a change of heart, the buyer loses nothing: With no written contract, there is no deposit to forfeit.

Also, verbal offers rarely take into account the many important details that are covered in a written contract. Price is just one item. Among other things, there are points, deposits, inspections, appraisals, financing and the closing date.

The moral is this: If you receive a verbal offer, even at or above your asking price, don’t get too excited. Rather, get it in writing.

It used to be that homebuyers had to pay off their past-due federal taxes to obtain financing. But no more, at least not when the mortgage is being purchased by Fannie Mae.

Under new rules from the government-sponsored company, which helps keep the money flowing to primary lenders, as long as you have an approved payment plan with the Internal Revenue Service, you can qualify for a home loan.

But realize that the monthly payments under the IRS plan will be counted as debt when your lender calculates your all-important debt-to-income ratio. Consequently, you may not be able to borrow as much as you would like.

TIP: Try to renegotiate your agreement with the IRS so you have smaller payments and a longer payoff period. It’s the monthly debt that counts against you, not how long you have to pay it, so this step should allow you to borrow more.

Alternatively, pay your entire tax debt off as soon as possible before entering the housing market. Unless you have the cash on hand right now, you may have to wait a while to buy, but it could be worth it.

As usual, there are rules that come with Fannie Mae’s new guidelines: First and foremost, a Notice of Federal Tax Lien cannot have been filed against you in the county in which the property is located. Also, at least one payment under the IRS agreement must have been made prior to closing. The lender must obtain extra documentation, including:

-- An approved IRS installment agreement with the terms of repayment, including the monthly payment and total amount due.

-- Proof the borrower is current on that contract. Acceptable evidence includes the most recent payment reminder from the IRS, reflecting the last payment amount and date received, and the next payment amount and due date.

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