Necessary Parts of a Valid
Real Estate Contract

When you had Motormouth Mike over on the Fourth of July, you happened to mention that you are going to sell your house, outlined the terms and asked him if he'd be interested.

You went to Bushwacker Fest with Mike last weekend, and after his second 151 Bushwacker, Mike looked you in the eye, said he's going to buy your house and shook your hand.

When Mike woke up the next day, with Joan Jett's voice still pounding in his brain, he called to say he wasn't serious about buying the house.

You made an offer. He accepted, and communicated his acceptance to you. That's an oral contract. Can you force him to buy your home through the legal system?

No such luck.

Contracts involving the transfer of real estate have to be in writing and signed to be enforceable. There are only two instances in which this isn't the case: if the buyer has paid part of the purchase price and has either made improvements to the property or has taken possession; or if both the buyer and seller have performed all terms of the contract. In those cases, you can't go back after the fact and wiggle out of the deal.

There are four other necessary elements to a real-estate contract:

1. Competence. All parties have to meet on the same legal and mental plane. For example, if you make a deal with someone who's under 18, a minor is technically incompetent and can void the deal without recourse to you (although you are bound to the contract: it's a one-way street). In a similar light, someone who is insane or intoxicated at the time of the deal may have grounds to void the contract.

2. Legality. You can't form a contract to do something illegal. The terms have to be enforceable in court.

3. Mutual assent. One party makes an offer. The other party accepts, and communicates that acceptance to the offeror. When you have an offer, acceptance and communication, you have a contract.

4. Consideration. Each party has to promise to do something. In real-estate deals, one party usually promises to pay money, and the other party promises to transfer the property. Consideration need not involve money, however: it also can be "good consideration," something that you can't measure, such as love.

You now know that a real-estate contract must be in writing. But remember: make sure ALL terms of the contract are in writing. If a seller promises you she'll throw in $462 toward your closing costs, and will kick in a rake and a fishing pole to boot, make sure it all becomes part of the final written contract.