What is a significant risk associated with verbal agreements in real estate transactions?

Verbal agreements in real estate transactions pose a significant risk due to their propensity to lead to disputes stemming from a lack of proper documentation. Unlike written agreements, which provide a clear record of the terms and commitments made by the parties involved, verbal agreements rely heavily on memory and interpretation. This can result in misunderstandings or misinterpretations about what was agreed upon, which can lead to conflicts when the parties' recollections differ.

In formal real estate practices, the absence of written documentation can complicate matters, especially in legal proceedings. Courts generally prefer written contracts because they provide tangible evidence of the agreed-upon terms. Without such documentation, it becomes challenging to prove what was discussed, making it difficult to enforce supposed agreements. Therefore, the risk of disputes is significantly heightened with verbal agreements, underscoring the importance of having all agreements in writing to ensure clarity and legal enforceability.