When verbal contracts go bad

I have an older brother who lives in Florida. While having lunch together recently, he told me a heartbreaking story about one of his neighbors who took a chance on a great opportunity, but due to poor preparation and even worse execution, they are paying a heavy price for leaping forward in haste.

The short version of the story goes like this. The couple was presented with what appeared to be a great career opportunity out of state. Accepting the position being offered meant putting their house on the market at the worst possible time, in a state that is experiencing a higher than average foreclosure rate, and unemployment that is looking to be persistently long lived. But the opportunity appeared to be too good to pass up, so they jumped at it.

Unable to sell their house in the traditional manner within the time frame available to them, they got creative. They entered into a verbal contract to rent their house with an option to buy. That deal gave them a sufficient comfort level that they could move on to a new state, and a new job, with a sense of comfort that allowed them to purchase a second home in the new state.

Six months later, things were not quite so rosy. The new job did not pan out, and both the husband and wife found themselves unemployed, with two mortgages to meet. The verbal agreement to rent the house in Florida didn't work out either. The tenants damaged the house extensively, then left abruptly without a word of warning.

With financial pressure mounting, and no funds available to fix the house in Florida, the couple entered into another verbal agreement, over the phone, with another rent-to-own tenant who agreed to maintain the property, pay the taxes and insurance, and rent the house for a price that would keep the still unemployed owner's heads above water.

Four months later, with a second verbal contract broken, the Florida house in disrepair, and a truly desperate financial situation becoming more bleak by the day, a short-sale appeared to be the only option remaining that would keep the couple out of foreclosure, and potentially, from declaring bankruptcy.

A resolution has not yet been found. And my brother was amazed and saddened to report that the couple continues to do their best to patch the holes in their leaking financial ship, completely on their own.

As sad as this story is, it is made worse with the knowledge that most of the events that have transpired could have been avoided if those verbal contracts had been written contracts. Being in a rush, and trying to get all their loose ends tied up quickly, backfired on these poor people – twice! Now who knows what sort of a future they face? Unless and until they seek guidance from someone who has an understanding of their real options, someone who can make recommendations for how they might best proceed, there is certainly nothing in their story that would suggest the future is any less debilitating than the recent past has been.

It's just sad. It really is.