Statute of Frauds does not Apply to Sale of Homebuilder Services
Question: In a recent column you said that, if the owner of a lot verbally agrees with a homebuilder to have a home built on the lot, this verbal agreement is enforceable. I am a licensed real estate agent. In real estate school we were taught that all contracts for the sale of a home or any other real property had to be in writing. Was I taught wrong?
Answer: No. If a home or any other real property is being sold, the contract generally must be signed and in writing. Arizona Revised Statutes, Section 44-101 is Arizona’s Statute of Frauds. This law states which types of contracts must be in writing. You are correct in that Arizona law includes contracts involving the sale of an interest in real property (land), which must be written and signed by the parties. In my recent column, however, the owner of the lot and the homebuilder did not agree to a contract for the sale of real property, but agreed to a contract for, one, the sale of bricks and mortar, and, two, for the sale of the homebuilder’s personal services to build a home with the bricks and mortar. Arizona’s Statute of Frauds also requires contracts for goods of over $500 to be signed and in writing, but because this verbal agreement is primarily for the homebuilder’s services, courts have said that the transaction falls outside of the statute. Even though the statute of frauds doesn’t apply to sale of homebuilder services, this verbal agreement to build a home, however, must be proven and must have the essential terms of any contract, such as price and completion date.
Note: Although a verbal agreement may be enforceable, a written agreement should always be drafted and signed by the parties.