What Makes a Valid Real Estate Contract
For a real estate contract to be valid and enforceable:
- Must be in writing
- Must be signed
- Must have consideration
- Must identify the property
- Must state the purchase price or a reasonably ascertainable figure
- Must show that all parities have a “a meeting of the minds.”
Case#1.
A few years ago, a landowner proudly announced to his neighbors that a professional baseball player was buying his land, and this had been done without a real estate agent. Every Monday morning, at the coffee shop, the landowner gushed about the previous weekend visit from the baseball player and his gorgeous blonde girlfriend. He elaborated on the girlfriend’s comment that “this property was the most beautiful she had ever seen.” The owner was enamored that a professional baseball player was buying his farm. The landowner was so enamored that he never hesitated when the ballplayer made demands. He bulldozed trees, built a road, and cleared a space where the baseball player would build his “dream home.” In anticipation of the sale, the landowner purchased and moved into a home in town. Then, the weekend visits stopped. The next and only times he would see the baseball player was on televised baseball games. The landowner never sold his land to the baseball player. He was never reimbursed for the cost of removing trees, building a road or clearing the area for the dream home. Why? The landowner and baseball player had never signed a contract.
Case #2.
A buyer’s agent called and asked me to show a 120-acre listing to him and his buyer. At the end of the showing, the buyer said he would pray before making his decision. Two days later his agent delivered an offer to purchase. The agent also relayed a message from the buyer to the sellers saying that this property was an answer to his prayers. The sellers and the buyer signed a sale contract. During the weeks leading up to theclosing, the sellers invested time and money to meet the demands the buyer had requested in the sale contract. Then two days before closing, the buyer sent an email. He and his wife were sorry, but through prayer, they were directed not to purchase the land. 
He knew the seller understood and would return his $10,000 earnest money deposit. I called the sellers with the bad news and the request for the $10,000 earnest money. One of the sellers quickly responded, “I just prayed, and the answer is we’re keeping the money.” In the end, the sellers felt a touch of forgiveness and returned one-half of the earnest money that the buyer, at the advice of his attorney, willingly accepted. We sold the property for more money six months later.
Case #3
A couple made an offer to purchase 95 acres. The proposal included contingencies. My client countered the buyer’s offer by raising the price but agreed to the contingencies. I delivered the contract to the couple, but they wanted to talk to their banker before signing. The next day, they brought the contract with a clause recommended by the banker. The clause was meaningless, but this change voided the seller’s counteroffer. He would need to initial the new clause to make the contract valid. Soon after the couple left, a man called asking if the property was still available. I said “yes,” since the seller had not yet approved the change. An hour later, the new buyer signed an offer to purchase for $500 more than the first contract. There were no contingencies.
Both contracts were presented to the seller that evening. The seller accepted the second contract. When I called the couple, they couldn’t understand how another contract had been submitted so quickly after their contract. A few days later, the second buyer told me the banker had called him after the couple had left his office. The banker told him the details of the contract, including the price and contingencies. He bought the 95 acres.
Case #4
I represented two owners of 85-acre hunting land in Montgomery County. A buyer who was also a real estate agent made an offer to purchase the land. His offered price was very low and contained some unrealistic contingencies. After the exchange of several written counteroffers, the buyer called. He agreed to the price but asked if the sellers would agree to one minor change. I spoke with one of the sellers who said “yes,” and he thought his partner would also agree. I called the buyer with the information. The next day, he delivered his signed contract with the verbally agreed upon change. Then, I got a call. “Is the property still available?” The caller stated that he heard an offer to purchase had been made and asked what price and terms would beat out the other contract. I explained that the information in the other contract was confidential. He asked if a full-price contract with no contingencies would buy the property, I told him to sign an offer to purchase, and I would present it to the seller. He signed his offer to purchase early in the afternoon. 
I called the first buyer and told him of the other offer. The buyer bristled and reminded me that the sellers had verbally accepted his contract. I told him that as a real estate agent, he knew that verbal acceptance did not constitute a valid contract. I offered him an opportunity to resubmit another contract, but he refused. That afternoon, the sellers accepted the full-price contract with no contingencies. The rejected buyer was upset with me, but the sellers sold for a higher sale price.
Summary
Case #1 – Experienced real estate agent would not have been mesmerized by the celebrity status of the baseball player. He would have required the baseball player and seller have a “meeting of the minds.”
Case #2 – There was a valid contract; therefore, the sellers were able to recover their costs.
Case #3 – Until an offer to purchase had a 100% meeting of the minds, the door was open for another offer to purchase.
Case #4 – The seller’s verbal acceptance of the offer did not constitute an enforceable contract.
When two offers to purchase are received at the same time, and they are from friends and/or neighbors, the seller can be in a tricky position. Here’s where the real estate agent is helpful as the “go-between.” Most of the time, the losing buyer is upset with only the real estate agent.
