Detroit, Michigan (PRWEB) August 29, 2013
The Statute of Frauds is based on old English law and requires that certain contracts be in writing in order to be enforceable against the parties to the contract. The statute applies to real estate sales and transfers or leases for more than a year. The Statute of Frauds is a misnomer and instead should be called the statute "against" frauds since its purpose is to memorialize a transaction to writing, preventing confusion and fraud.
But "getting it in writing" is not always easy. Sometimes people become a party to a contract because they feel rushed or simply take "the word" of the other party or agent. Disagreements abound between strangers, professionals and family members alike, when real estate agreements are not reduced to writing.
Here are 5 steps that buyers, sellers, landlords, tenants, real estate agents, investors, borrowers, and lenders can take to reduce legal contention when working with a real estate agreement:
1. Real estate closings. Reduce surprises at a real estate closing by asking for a preliminary closing package, including a settlement statement, several days before the scheduled closing. Another name for a preliminary closing package is an "attorney's package". A lender, mortgage broker, title company or real estate agent should always comply with the request to provide for advanced documentation.
2. The walk-through. A new home buyer should always go through a final walk- through in advance of a home closing. Likewise, a tenant should do a walk -through with a check list noting any and all repairs or issues with the premises. Never take someone's word that a noted repair will be done. Have the responsible agent put it in writing with a time set for completion. Make sure to retain a copy of the checklist.
3. Loans. When applying for a mortgage, applicants are required to receive a written estimate of their anticipated loan costs. Known as a Good Faith Estimate of Settlement Charges ("GFE"), it must be sent to applicants within 3 days of making an application, and its purpose is to allow the consumer to compare the mortgage fees from different mortgage companies as well as to prevent sticker shock. Unless there are problems with a loan applicant's initial qualifications, the terms of the final loan should be relatively similar to the final loan approval, and the terms of the loan should remain the same at the closing.
4. Modifications. Changes to an original loan term, real estate purchase or lease agreement require both parties to sign and agree to the proposed changes. These signed changes are evidenced on a amendment or addendum. Changes to a written contract must be agreed to by both parties and evidenced by their signatures in order for the change to be valid. Sometimes, just a term or date may be changed. In that case, both parties need to initial the changes.
5. Specificity. When reviewing a real estate agreement (or any contract for that matter) if there are any ambiguous terms, it's best to take the time up front and get specific with a term or provision so as to reduce headaches and confusion later. For instance, a landlord may provide that a leased apartment is for three tenants. Name each tenant. A home buyer may be unsure if a household item they like in a home will be included in the purchase. They should specify it in the offer. Don't rely on oral promises. Rely on the written word.
Conclusion. Reducing an agreement to writing is important not because people aren't honest, but for when things don't go as planned. When there is a problem, the parties can refer to the contract and what was meant and memorialized in writing. Each day numerous lawsuits are filed on behalf of parties that dispute the meaning and intent of written contract provisions. So imagine the legal problems and financial angst generated by disagreements surrounding an oral real estate agreement. Taking the steps as discussed above will ensure a smooth outcome to one's real estate transaction.