A Handshake Is Not Binding in Real Estate
In the world of real estate, property transactions involve substantial financial investments and legal complexities. A handshake or verbal agreement may show that a buyer and seller have reached an understanding, but it generally isn’t the same thing as having an executed real estate contract.
Until an agreement is properly documented and signed by everyone involved, important details can remain unsettled, and each side may walk away with a different idea of what was actually agreed to.
We Agreed on the Price. Are We Under Contract?
Here’s a scenario that plays out often. A buyer offers $600,000, the seller tells the listing agent “I’ll take it,” and everyone shakes hands feeling like the deal is done. The buyer starts planning their move. Then another offer comes in, or the seller has second thoughts, and suddenly the buyer learns the house isn’t actually theirs.
Agreeing on price is just one piece of a transaction. A completed deal also requires agreement on financing terms, the escrow deposit, contingencies, the closing date, and everything else that goes into the contract, all put in writing and signed by every party. Until that happens, a verbal yes or a handshake on price alone doesn’t mean the parties are under contract.
Verbal Agreement Versus Written Contract
The difference between the two comes down to what each one actually provides:
- A verbal or handshake agreement may establish that the parties have reached some understanding, but important terms are often still missing, and it’s difficult to prove exactly what was agreed to if a disagreement comes up later.
- A written, executed contract documents the price, terms, deadlines, and contingencies everyone agreed to, giving both sides a record to rely on and a framework for how the transaction will actually proceed.
This is also why the written contract, not a conversation or a listing description, ends up being what matters most once a transaction is underway. The signed agreement controls the transaction, and buyers who assume otherwise sometimes run into unpleasant surprises.
When Does an Offer Become a Contract?
A real estate transaction typically moves through a few stages: conversation and negotiation, a written offer, possibly a counteroffer or two, acceptance, and finally an executed contract once every required party has signed.
Once the parties have reached agreement on the required terms and properly executed the contract, the transaction can become legally binding. The exact requirements can depend on the specific circumstances and the terms involved, so if you’re ever unsure whether something is truly binding, it’s worth asking your agent or a real estate attorney directly rather than assuming based on a conversation alone.
Understanding the difference between an offer and a signed contract is one of the most useful things a buyer or seller can walk into a transaction knowing.
What Happens if Someone Changes Course Before Signing?
Until the parties have a properly executed agreement, the transaction may not be finalized, and either side may still change direction. A seller who verbally agreed to a price can accept a different offer if it comes in first, which is part of why buyers sometimes wonder whether submitting a competing offer on a home that already has verbal interest is worth trying. A buyer isn’t locked in either. It’s part of why buyers sometimes have second thoughts while an offer is still being written, well before anything has actually been signed.
What a Written Contract Actually Establishes
A well-drafted contract puts the specifics of the deal in writing so there’s no confusion later. That generally includes:
- The names of all buyers and sellers
- An accurate description of the property being sold
- The agreed-upon purchase price
- Payment terms, including whether the buyer is paying cash or financing, and if financing, how much and through what loan program
- What’s included in the sale, such as appliances and furnishings
- Contingencies, such as home inspections, appraisals, and financing
- Deadlines for each contingency along with a closing date
- Remedies if either party fails to perform
Protecting Your Interests
As a buyer and seller, you need to make sure your interests are protected in a real estate transaction:
- Consult with Professionals: Enlist the services of an experienced real estate agent, and/or real estate attorney, who can draft, review, and advise on all real estate contracts, addendums, and disclosures.
- Get Everything in Writing: Refrain from relying solely on verbal agreements or handshakes. Insist on having all terms documented in a written real estate contract.
- Thoroughly Review Contracts: Don’t just sign a real estate contract without reading it. Take the time to review every page and seek clarification for anything that’s unclear before signing.
- Negotiate and Amend: If certain terms don’t align with your expectations, negotiate with the other party and amend the contract accordingly. Make sure all parties initial or sign off on any changes.
- Consider Mediation: In case of disputes, consider mediation as an alternative to litigation. Some real estate contracts already include mediation as a required first step when there’s a dispute, but if yours doesn’t, it’s worth considering.
Frequently Asked Questions About Handshake Agreements
Is a verbal agreement enforceable in a real estate transaction? A verbal agreement generally isn’t a substitute for a properly executed written real estate contract. Contract enforceability can depend on the circumstances, the terms involved, and applicable state law.
Does texting or emailing about terms count as a binding agreement? A text or email shouldn’t be assumed to be a substitute for a properly executed real estate contract. Electronic communications can have legal significance in some circumstances, so if the parties are disputing whether an agreement was formed, it’s best to have the specific situation reviewed by a real estate attorney.
What should I do if a seller or buyer won’t put an agreement in writing? If the parties intend to move forward, the next step should be putting the agreed-upon terms into the appropriate written contract and having the necessary parties properly execute it.
Does the answer change depending on the state or the specific situation? It can. Contract requirements and how agreements are treated legally vary by circumstance, so this article is general information rather than legal advice. If you’re ever unsure whether something is binding, a real estate attorney can review your specific situation.
Final Thoughts
A conversation can start a real estate negotiation, but a handshake or a verbal yes doesn’t mean the deal is locked in. The terms that matter, price, financing, contingencies, and deadlines, need to be documented in a proper written agreement and signed by everyone involved before either side should assume the transaction is settled.
Whether you’re buying or selling in Wellington, Royal Palm Beach, or elsewhere in Palm Beach County, treating a handshake as anything more than the start of the process is where a lot of avoidable disappointment comes from.
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A seller says yes over the phone. Does that mean you have a deal? Here's what actually makes an offer binding in a real estate transaction. #realestate #realestatecontractAbout the Author
Top Wellington Realtor, Michelle Gibson, wrote: “A Handshake is Not Binding in Real Estate”
Michelle has been specializing in residential real estate since 2001 throughout Wellington, Florida, and the surrounding area. Whether you’re looking to buy, sell, or rent, she will guide you through the entire real estate transaction. If you’re ready to put Michelle’s knowledge and expertise to work for you, call or email her today.
Areas of service include Wellington, Lake Worth, Royal Palm Beach, Boynton Beach, West Palm Beach, Loxahatchee, Greenacres, and more.
