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There are no ‘oral’ agreements in real estate

By Staff | Oct 20, 2008

Q: My sister and her husband are about to make an offer on a house that they don’t really like. My brother-in-law says that he’s going to have clauses in the contract to make it easy for them to back out. He says that he’s going to write an unrealistic inspection requirement and put in a loan contingency that no one could meet. Does this make sense?

A: A contract is a legally binding agreement that, at least in real estate law, must be in writing. Only what is written counts, there are no “oral” agreements. Contracts do have contingency clauses for home inspections and financing.

The inspection contingency allows your sister and her husband a specified amunt of time to inspect the property and ensure that it’s in reasonable condition. They can hire a professional property inspector who will notify them of problems and then they can use these defects to renegotiate the price to cover fixing them.

This clause cannot be used to back out of the offer. They cannot use minor objections or imagined maladies to invalidate a contract. Your relatives have an implied responsibility to exercise good faith, and if they don’t, they could find themselves in legal difficulty.

They cannot back out of the offer by simply stating that they couldn’t find a loan either. For example, if they insist on zero percent financing with no money down, they are not acting in good faith. Their loan contingency clause should be realistic. They could write something like “buyer is not required to accept a loan with an interest rate of higher than 8 percent over 30 years.”

Your sister and her husband are exposing themselves to real trouble if they write a contract that they have little intention of honoring. They could lose their earnest money or be sued by the seller who might believe they are acting in bad fatih, especially if they are.

It sounds like they would benefit from professional legal assistance before they sign the contract. There is no automatic right of rescission for real estate contracts and only what is written in the contract is enforceable.

Attorney Syliva Heldreth is a Certified Specialist in Real Estate Law. Her office is located at 1215 Miramar Street in Cape Coral.

This article is not intended as specific legal advice to anyone and is based upon facts that change from time to time. Individuals should seek legal counsel upon any matter involving the law.