In the fast-paced world of real estate, it’s not uncommon for deals to be made quickly, verbally, and without a written contract. These types of agreements are known as verbal contracts, and they can be enforceable in certain situations.
However, verbal contracts can also be tricky to enforce, since there’s no physical record of the agreement. If you’re thinking of engaging in a verbal contract in the real estate industry, it’s important to understand the risks and potential challenges involved.
What is a verbal contract?
A verbal contract is an agreement between two parties that’s made orally, rather than in writing. In real estate, verbal contracts are typically made between buyers and sellers, landlords and tenants, or real estate agents and clients.
While verbal contracts are enforceable, they can be more difficult to prove than a written contract. A written contract provides a clear record of the agreement made, while a verbal contract relies on the memories and testimony of the parties involved.
When is a verbal contract enforceable?
In order for a verbal contract to be enforceable in real estate, there are a few key requirements that must be met. First, there must be a clear and mutual understanding of the terms of the agreement. This includes the purchase price, the property being sold, and any other important details.
Second, both parties must give their consent to the agreement. This means that both the buyer and seller, or landlord and tenant, must agree to the terms of the verbal contract.
Finally, there must be some form of consideration exchanged between the parties. This means that something of value must be given in exchange for the agreement – such as money, property, or services.
If all of these requirements are met, then a verbal contract can be legally enforceable in the real estate industry.
What are the risks of a verbal contract?
While verbal contracts are enforceable in certain situations, they do come with some risks. Since there’s no physical record of the agreement, it can be difficult to prove the terms of the contract if a dispute arises.
In addition, verbal contracts can be easily misunderstood or misremembered. This can lead to disagreements between the parties involved, especially if there was no clear agreement on the terms of the contract.
Finally, verbal contracts can be difficult to enforce if one party decides to back out of the agreement. Without a written contract, it can be hard to prove that a verbal agreement was ever made in the first place.
How to protect yourself in a verbal contract
If you’re thinking of engaging in a verbal contract in the real estate industry, there are a few steps you can take to protect yourself.
First, make sure that you have a clear understanding of the terms of the agreement before agreeing to a verbal contract. This can help to prevent misunderstandings later on.
Second, consider recording the conversation where the verbal contract is made. This can provide valuable evidence if a dispute arises.
Finally, be prepared to take legal action if necessary. While verbal contracts can be enforceable, it’s important to have a plan in place in case the other party fails to meet their obligations.
In conclusion, verbal contracts can be a useful tool in the real estate industry, but they do come with some risks. If you’re thinking of engaging in a verbal contract, be sure to understand the requirements for enforceability and take steps to protect yourself in case of a dispute.