Can a Handshake Deal Cost You Thousands?
Imagine this: A buyer and seller shake hands on a property sale, but a week later, the seller gets a better offer and backs out. The buyer protests, “But we had a deal!” Unfortunately, in Florida, a verbal agreement isn’t enough to hold up in court.
Let’s break down why real estate contracts must be in writing and how to protect yourself, and your clients, from costly disputes.
Are Verbal Agreements in Florida Real Estate Legally Binding?
Short answer: No. While some verbal agreements (like short-term leases under a year) may be valid, under Florida’s Statute of Frauds, real estate contracts must be written and signed to be enforceable.
Why Are Verbal Real Estate Agreements Risky?
1. No Proof = No Legally Enforceable Contract
Without a written agreement, it can be difficult (if not impossible) to prove the terms that were agreed to – or if there was even an agreement at all- and the situation ultimately comes down to one person’s word against another’s. That’s one of the main reasons Florida’s Statute of Frauds was put in place.
2. Little to No Legal Recourse for a Breach of Contract
If a buyer verbally commits but later backs out, the seller can find themselves in quite the precarious situation. Why? Because there’s no legally enforceable contract. A seller can likewise verbally accept an offer, but unless there’s a signed agreement, they can technically go back on their word and accept another, higher bid leaving the buyer without any legal recourse.
3. Earnest Money Disputes Become Messy, and Misunderstandings Are Almost Guaranteed
Without a contract, there’s no clear agreement on what the parties will do under certain situations. For example, if a party defaults, would the earnest money deposit be returned to them or paid to the non-breaching party? What about financing contingencies, the pre-purchase inspection processes, and any deadlines? There’s no question these are all questions you’d want to work out before an issue arises. Putting these understandings in writing helps ensure that everyone is on the same page.
4. The “Handshake Deal” That Falls Apart
A buyer and seller agree verbally, but the seller later sells to someone else. The buyer tries to sue but has no legal standing without a contract.
5. The “We’ll Work It Out Later” Trap
All too often I come across cases where a seller agrees to allow a buyer to move in before closing without a written agreement, because they trust the other party or believe strongly in the “power” of a handshake. However, if the deal falls apart, the seller can face a complicated, expensive legal battle and even find themselves in court to remove the buyer from a property they never purchased.
How to Avoid the Risks of Verbal Agreements
1. Put Everything in Writing
Even if both parties agree verbally to the terms of a real estate transaction, it’s critical that the agreement is memorialized in writing and then signed by all parties. Formal written agreements are obviously the best course of action, and while not legal binding, using other written forms of communication like emails as a backup could serve as evidence of what the parties intended and prevent (or at least mitigate) any misunderstandings down the road.
2. Use Clear, Legally Binding Contracts
Real estate contracts should at a minimum include:
- The parties to the transaction
- The property that’s the subject of the agreement
- Purchase price
- Closing date
- Contingencies (financing, inspections, etc.)
- Earnest money terms
- The signatures of anyone bound by the agreement
3. Involve an Attorney, Especially for More Complicated Deals
When in doubt, consult a real estate attorney who specialize in the type of transaction to review and draft contracts to ensure that all terms of an agreement are properly documented and legally enforceable.
Final Thoughts: A Handshake Isn’t Enough—Get It in Writing and Protect Yourself!
A verbal agreement might seem quick and easy, and can be particularly tempting in real estate transactions that inherently involved stacks of paperwork, you’re relying entirely on your counterpart keeping their word. If things go south, there’s a good chance you’ll find yourself in a legal battle that can be stressful, expensive, and risky. Worst of all, the majority of the issues that often arise in real estate deals can be completely avoided by making sure everything is properly documented. So whether you’re a realtor, buyer, or seller – the best rule of thumb is to always get everything in writing.
If you’re unsure of what needs to be included in a contract, or find yourself in any of these precarious situation involving a verbal agreement, you should contact a local experienced real estate attorney to help you navigate through the process and protect your legal rights.
