Is verbal agreements binding in alabama for real estate

Fact Scenario:

Buyer A’s REALTOR® submits a signed purchase offer to the Seller’s REALTOR®. To save time and effort, Seller instructs his REALTOR® to counter Buyer A’s offer via email. Buyer A’s REALTOR® responds with another counter-offer, no signature, over email. Seller instructs his REALTOR® to accept! Buyer A’s REALTOR revises the purchase agreement to reflect the provisions agreed upon, sends to Buyer A for initials and signature, and emails the purchase agreement to the Seller’s REALTOR®. While Buyer A is signing the revised purchase agreement, Seller’s REALTOR® receives an offer from another REALTOR® working with Buyer B. Since the Seller’s REALTOR® is legally obligated to share the offer, Seller’s REALTOR® sends Buyer B’s offer to Seller, who immediately accepts by signing the offer to purchase. Seller’s REALTOR® sends the signed purchase agreement to Buyer B’s REALTOR®, and texts Buyer A’s REALTOR® that the Seller has accepted another offer. Buyer A is distraught.

Image

Legal Notes:

In Alabama, a contract for the sale of a house is binding if in writing and signed. Ala. Code § 8-9-2(5). For an electronic name to be considered a signature, Alabama law essentially requires the signer to intend the name to be a signature. Ala. Code §§ 8-1A-7; 8-1A-2(9). For an agent to legally sign a real estate purchase agreement on behalf of his or her client, the client must give written authorization to the agent. Hight v. Byars, 569 So. 2d 387 (Ala. 1990). For a verbal commitment to be valid, the buyer must a) pay at least a portion of the purchase price, and b) be put in possession of the property by the seller. Ala. Code § 8-9-2(5).

Analysis:

In the scenario above, Seller and Buyer A did not enter into a binding purchase agreement. First, Seller never signed Buyer A’s purchase agreement. Second, there is no evidence that Seller’s REALTOR® intended the text message as a signature, and, third, even if the Seller’s realtor’s name was intended as a signature, the Seller’s REALTOR® did not have written authority to sign on Seller’s behalf. Seller is not bound by Seller’s commitment to Buyer A. Buyer B’s purchase agreement is valid and binding.

Image

Tips:

  1. Keep It Written: Where possible, send a signed, revised purchase agreement with each counter-offer. This is often inconvenient or impossible with fast-paced negotiations but is the best way to ensure a signature is affixed to the purchase agreement quickly. Revisions can be made in handwriting, but your client’s initials should accompany each revision
  2. Consider An Electronic Document Service: Minimizing the risk that the other party backs out before signing may entail asking your client to sign a document more often, making a real estate forms software program, like NAR-member benefit ZipLogix or other, similar programs, very helpful in speeding up the process. Remember electronic signatures are just as valid as hand-written signatures.
  3. Cover Your Bases: Inform your client of the laws regarding purchase agreements. If, for whatever reason, negotiations must be verbal, or by text or email, tell your client that delays can cause a deal to fall through, and the deal is only binding when buyer and seller sign.
  4. Verbal Modifications Too: To be binding, all modifications to the purchase agreement must be in writing and signed by the parties.
  5. Communicate Clearly: Even if a text message or email is not binding, both are important if you are not revising the purchase agreement for each counter-offer. When texting or emailing a counter-offer, think about stating “in response to your offer at [insert date and time], all terms remain the same, except…” or some variation so that a term does not fall through the cracks.

“Disclaimer: This article provides general information only and does not constitute legal advice. No attorney-client relationship is created by reading, viewing, opening, or other action related to this article. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Specific circumstances may change the applicable law or advice a competent individual would provide. In addition, this information is not meant to supplant or in any way replace Errors and Omissions Insurance or other insurance coverage. Mistakes may occasionally be made. Once notified, we will work diligently to correct the issue in a timely manner and mark any updated or changed articles accordingly.”