Real Estate 101: The Statute of Frauds is a really old law that originated in England in 1677. It requires that certain transactions must be in writing, signed by the party to be accused, basically the defendant. Real estate purchases are one of the transactions covered by the fraud statute. In real estate transactions, the SOF further requires that the deed contain a description of the property, a description of the parties, the price, and any agreed price or payment terms.
There are some exceptions to this rule. Partial return is when someone has paid all or part of the purchase price, has taken possession and / or made substantial improvements to the land. For example, if Bob made a verbal contract with Sue to purchase a property, paid her a down payment of 25% of the agreed purchase price, and built a house on the land, then although the SOF would invalidate the oral contract, Sue could argue that Bob’s partial performance proves the existence of the contract.
In addition to partial compliance, equitable estoppel and promissory estoppel can be used to prove a verbal contract for the sale of the land. Equitable estoppel is based on an act or a representation. Promising Estoppel is based on a promise.
Once a contract has been signed, a buyer becomes the equitable owner of the title at the time of the performance of a binding contract. Under common law, the risk of loss rests with the buyer after signing the sales contract. In other words, if the house catches fire between the signing of the contract and the closing, the risk is borne by the buyer. The buyer will still have to close the deal.
There are some states that have a different rule. States that have enacted the Uniform Buying and Sellers Risk Act hold that the risk of loss rests with the seller unless legal title or possession of the property has been passed. There is a minority of states that have passed this statute. So in most states, the risk of loss rests with the buyer.
Surprisingly, it is quite common for people to make verbal contracts to sell parts of their property, without realizing that it must be in writing. Later, when the buyer does not pay, the seller does not know how to proceed. An attorney familiar with the nuances of real estate law can help with this.