The Truth About Verbal Offers in NYC Real Estate

You may be tempted to submit a verbal offer if you’re buying a property in NYC. As tempting as it may be, please don’t take the bait. Verbal offers in NYC are rarely taken seriously, and they can actually harm your negotiating position and ultimately reduce your odds of securing a property.

We’ll explain why verbal offers in NYC are akin to suicide in this article. Click on the sections below to learn more.

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Why are verbal offers uncommon in NYC?

Verbal offers are uncommon in NYC real estate for many reasons. For starters, there’s typically plenty of demand from qualified buyers regardless of market conditions.

Good listings sell quickly, and the sale process is fast-paced as a result. This competition incentivizes buyers to submit written offers.

After all, if two offers have the same terms but one is highly organized and provides proof of funds, a pre-approval letter and attorney contact information, which offer do you think the seller will accept?

Verbal offers in NYC are rarely taken seriously, and they can actually harm your negotiating position and reduce your odds of doing a deal.

It’s no surprise that the most successful buyer’s agents do the best job when it comes to submitting organized and well-presented offers.

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Since buyers are motivated to submit written offers to get a leg up, sellers in NYC are therefore accustomed to receiving fully documented offers. 

As a result, verbal offers in NYC are almost always dismissed outright by sellers.

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Verbal offers don't work for co-ops

Another reason why verbal offers are rarely used in NYC is because most properties for sale are co-ops. Co-op apartments have financial requirements for buyers.

A co-op board will reject any buyer who doesn’t meet the building’s financial requirements, which may include a debt-to-income ratio limit and a post-closing liquidity requirement.

The seller of a co-op obviously does not want their buyer to get rejected, as the seller would have to start from scratch and re-list the property having lost all momentum. Moreover, the listing would be saddled with the stigma that it’s a difficult co-op board, thereby alienating prospective buyers.

As a result, a prospective buyer’s offer terms are essentially irrelevant to the seller of a co-op in the absence of financial documentation, such as a REBNY Financial Statement. By definition, this means verbal offers are not actionable in the case of co-op apartments.

Refer to our detailed guide on how to submit an offer on a co-op in NYC.

Verbal offers are risky for agents

Many NYC listing agents are loath to entertain verbal offers because they’re difficult to document. Unless an offer is in writing, there’s always a risk of miscommunication or dishonesty which may harm the reputation of the listing agent in the eyes of the seller.

Let’s step into the shoes of a listing agent in NYC. You are listing a townhouse in Bedford-Stuyvesant with an asking price of $1,250,000.

You receive a call from a self-described ‘investor’ who conveys an oral offer of what you understand to be $1,250,000. You email this to the seller, who is quite excited by the prospect of a full-ask offer and decides to accept it.

You call back the buyer to inform them that their offer of $1,250,000 has been accepted. The buyer says, “My offer was $1,050,000. You must have misheard me.”

Hopefully you can see how awkward and embarrassing it will be to relay this news to the seller. Perhaps it was a genuine misunderstanding, but what if the buyer is actually lying? You won’t ever know, but what you can bank on is the fact that the listing agent’s credibility with the seller is irreparably harmed.

As a result, listing agents in NYC are quite unreceptive to verbal offers. Most experienced listing agents, upon sensing that a verbal offer is forthcoming, will ask the buyer (or broker) to put it in writing. This way, there is no risk of miscommunication.

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Verbal offers rarely work out

Another reason why NYC real estate agents dislike verbal offers is because they’re inherently unlikely to work out. Every time a listing agent presents a seller with an offer that doesn’t go through, it diminishes the agent’s credibility in the eyes of the seller.

However, listing agents have no choice but to present verbal offers since New York licensing law requires them to do so.

The last thing a listing agent wants is to have to present a verbal lowball offer to a seller. Many sellers react quite poorly to lowballs and take their aggression out on the listing agent.

Some sellers even reprimand their listing agent and tell them never to present them with such a low offer ever again. However, an agent cannot obey this order since it would be a violation of licensing law not to present every offer.

In short, verbal offers have low odds of success which makes both sellers and listing agents loath to seriously pursue them.

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Verbal offers are predatory

Verbal offers in NYC typically go nowhere because they’re almost always predatory by definition.

After all, wouldn’t a serious buyer want to submit a detailed, written offer since it maximizes the odds of a favorable response from the seller? This logic holds especially true in the case of a low offer where it’s going to be an uphill battle to entice the seller to consider it.

However, verbal offers are almost always lowballs. Why? It’s because buyers who submit verbal offers are almost always fishing for low hanging fruit. They’re looking for a seller who is asleep at the wheel.

Perhaps it’s a seller whose property has been sitting on the market for ages, or maybe the property is overpriced and is therefore discouraging others from submitting offers.

Buyers utilizing this approach don’t usually have time to submit a written offer for every property, as it’s ultimately a numbers game.

Since almost all verbal offers are predatory in nature, sellers and listing agents in NYC rarely take verbal offers seriously.

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How to determine your offer price

While verbal offers are typically a bad strategy for home buyers in NYC, calling the listing agent and informally hinting at an offer price is an excellent way to gather intel before submitting a written offer. The listing agent’s reaction to whatever number you hint at can help you ascertain the best starting offer.

For example, let’s say a property is asking $1,000,000 and you think the property is worth $950,000.

Before writing your offer, you call the listing agent to see if you can extract some intel on potential competition and what the seller is thinking.

You express interest and hint that something around $925,000 might make sense. Try to get the listing agent to do most of the talking.

Let’s say the listing agent responds as follows: “$925k is a non-starter. We’ve had offers higher and the seller hasn’t even countered.”

Based on this commentary you might conclude that a starting offer of $930k will be the most effective, even if your maximum number is still $950k. Without this intel, you might have considered a starting offer of $900k since the midpoint between this number and the asking price of $1,000,000 is $950k (which is the maximum you’re willing to pay).

Alternatively, let’s say the listing agent responds as follows: “Are you financing? How quickly can you close? Please email me your offer and I’ll present it right away. What was your name again?”

Based on this response you might conclude that the owner is highly likely to initiate a negotiation even if your initial offer price is in the very low $900s.

Disclosure: Hauseit® and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. No representation, guarantee or warranty of any kind is made regarding the completeness or accuracy of information provided.

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