In today’s fast paced world of technology, the thought of digital signatures and electronic contracts are becoming more and more common. As recently as 20-25 years ago real estate contracts were written down on the appropriate form, often called a Purchase Agreement, and physically signed by the Buyer and delivered to the Seller’s agent as an offer. The process was slow, sloppy, and by today’s standard… old fashioned. With the help of applications and software to send contracts to clients through email, they can now sign Purchase Agreements via email with an electronic validation stamp. The question often arises: WHEN is the contract actually in place and finalized?
I was reading an article the other day where “Agent A” had a Buyer client and sent over an offer to “Agent B” to present to their Seller client. Agent B acknowledged receipt of the offer, and called the Seller to tell them about the offer. Seller Agent B then got back with Buyer Agent A and told them of a counter offer they intended to make. This was done verbally and without signing the original Purchase Agreement, completing a Counter Offer form, and sending this information back over to Agent A. After some discussion and through a text message, the Agents and their client agreed to terms. The Agents agreed that they would complete the paperwork “in the morning”. This proved to be a fatal mistake on behalf of Agent A.
Unbeknownst to Agent A, the Seller and Agent B received another offer in the form of a Purchase Agreement before that paperwork could be completed. As it turned out the second offer was for a higher sales price which would net the Seller a higher profit on the sale of the property. The next morning, before all documents were finalized, Seller Agent B notified Buyer Agent A that their client would not be accepting the offer and was going under contract with another Buyer. You can imagine how the phone call went when Buyer’s Agent A had to call their client and tell them the news.
So what went wrong here? Quite a few things, but in the most simple explanation possible… neither agent secured the contract for their client. The Statute of Frauds is a law enacted in all states that requires certain agreements to be in writing and signed by all parties involved. Real estate contracts certainly fall into this category. Buyers and Sellers can verbally agree to the sale of a real estate property, but it would not be enforceable in court without an agreement satisfying the Statute of Frauds, and either party could back out at any time.
In the article I summarized above, the agents were wrongfully trying to complete a contract verbally that should have been completed in writing. All Purchase Agreements completed professionally through an IAR (Indiana Association of Realtors) Purchase Agreement form have a timeline on them for a response. If that deadline is up, and the Buyer does not have a signed PA or Counter, the offer is considered “dead” and unenforceable. Likewise, until a Purchase Agreement has been made and accepted, the Buyer has the right to rescind the offer and the Seller has the right to consider other offers.
Professional real estate agents should know to get everything in writing as part of their fiduciary responsibility to their clients. As mentioned before, technology has changed the pace of the real estate world. We can send and receive offers in a matter of minutes, especially with digital signature options. One of the most important roles that a real estate agent has in the transaction is to secure the contract for their respective client.
As the old saying goes, “it ain’t over till’ it’s over”. This is especially true in real estate.