In order for a real estate contract to be valid (in Maryland and the District of Columbia) it must be in writing. Verbal agreements have no weight. One party lays out the potential terms of the contract and the other party indicates agreement by signing. It must be signed by both parties to be valid.
In real estate, there are certain pieces to the puzzle that are required to be included in the contract.
- The first item has been mentioned, a valid contract must include offer and acceptance. One party offers to enter a legal agreement for the transfer of real property and the other party indicates acceptance of the terms of the offer.
- The second item necessary in a valid contract is consideration. In the sale of real property, one party offers real estate as consideration and the other party offers what they are willing to pay to acquire the real estate as consideration.
- The third thing necessary is called volume. One word that simply means that both parties possess characteristics that legally are recognized as having the capacity to enter into a contract.
- The last thing necessary is called legality. The contract must be of legal intent and not against public policy. (Public policy is not to be confused with the wishes of neighbors)
If you have all of the parts, you have a contract. The next hurdle faced is whether or not the contract is enforceable. On some occasions, one or both parties may be acting with illegal purposes. It might be that one of the parties entered into the contract because of threats, or maybe they were under duress or improper pressure. If a court determines any of these situations existed, the court may determine the contract unenforceable.
Notice, there is no requirement for a real estate agent. There is no need to use “boilerplate” forms. Two parties can come to a meeting of the minds, agree on terms of a sale, put their intentions in writing and consummate a real estate transaction. Local jurisdictions require a licensed firm to oversee the closing of a transaction to make sure that all promises in the contract have been met, taxes involved have been paid and that proper fees have been paid to local governments for recording the transaction.
It is no mystery what a valid contract can do. A valid contract can transfer real property ownership from one party to another.