A purchase agreement addendum is an additional document that is attached to an original lease or real estate purchase agreement with the purpose of adding some new terms or conditions to it. Addendums can be different, but they have a similar purpose – to help avoid striking out unnecessary terms and facilitate the reading of the purchase agreement. Read more about addendums in our short article.
An addendum to a purchase agreement is a document that acts as an addition to the fillable real estate sales contract. Its goal is to bring additional provisions that did not become a part of the original purchase agreement, or change the existing ones. Once the parties write the addendum and both sign it, it gets legal force and should be attached to the main contract.
For example, the buyer and seller agreed in the purchase agreement that closing costs will all fall on the buyer. Imagine that the buyer has changed their mind and now they want the seller to be partially responsible for the closing fees and charges. If the seller agrees to a new term, the parties have to write a statement that they are splitting the closing costs in an addendum that will be attached to the main contract both physically and by its content.
The parties have to carefully choose the language for the addendum as it typically overrides the initial terms of the main contract. Instead of striking out words or entire sentences from the agreement, the parties might agree to create a separate document that will revoke the needed terms. Choosing the creation of an addendum over changing the text in the purchase agreement is what probably any real estate agent would recommend.
There are certain types of addendums buyers and sellers most commonly use to amend a real property purchase agreement.
The addendum might also concern the conditions under which an early money deposit for the property will be returned to the buyer. For example, it might say that if the real estate purchase is contingent on the results of the buyer’s inspection of the home and there are some fundamental issues, the buyer will have the right to get back their deposit.
The termination letter signifies what will happen in case of cancellation of a purchase contract. It typically states that the buyer gets back their earnest money deposit in a certain dollar amount. To be valid, it should be signed by two parties and the agent holding the escrowed funds.
This closing date extension addendum is used when the closing date should be extended. The parties might need to extend this date for various reasons: title issues, issues with financing the buyer relies upon, the need of the buyer to sell their old property, or other reasons that are approved by the seller.
This inspection contingency addendum lets the buyer protect themselves from buying a property with material defects by having the ability to opt out of a property purchase contract in case the results of property inspection are unsatisfactory. The addendum might offer two options for the parties if defects are found: to negotiate the way to fix them or to return the money deposit to the buyer.
An appraisal contingency addendum is attached to a real estate purchase agreement to inform the seller of the buyer’s intention to have the property’s value assessed by a qualified third party. This document allows the buyer to withdraw from the contract or negotiate a price drop in case the appraisal reveals that the property’s value is lower than what was requested by the seller. It also enables the buyer to keep the earnest money deposit and avoid possible penalties.
In this addendum, the seller agrees to provide financing to the buyer so that the latter could purchase their property. The seller financing addendum might state that the buyer is obliged to provide all credit, employment, and financial details reasonably required by the seller.
This 3rd party financing addendum is similar to the previous one, but the financing in this case is provided by a third party, commonly a bank or government institution.
This document should be attached to a purchase agreement if the seller owes more money on property they sell than it is worth. The short-sale addendum states that the seller will seek the consent of a creditor to sell their property. After the closing, the seller might still need to pay the crediting party the remaining balance.
This escrow holdback agreement implies that money put in an escrow account will be held back until the seller completes specified tasks after the closing of the deal. These terms should be agreed upon in the purchase contract. Once the seller fulfills their duties, they are entitled to get the last payment for the sold property.
When a buyer enters into a real estate purchase agreement concerning a condominium association, they will need a copy of the organization’s bylaws, rules, and other related paperwork. The addendum gives the buyer the ability to first review the documents and check whether fees and services provided are reasonable or correspond to market conditions. Then, they should make their final decision regarding the purchase. The addendum should include the statement that if the buyer disapproves of what they have examined, they can get their money deposit back and do not proceed with the purchase of the property.
The addendum called an estoppel certificate is meant to confirm that the details included in the lease agreement between the tenant and landlord are true and correct. The addendum might be required by the buyer who wants to make sure that tenants leasing the property currently don’t have any claims against the landlord.
There are just several steps to creating an addendum to a purchase agreement.
What Are the Main Components of the Purchase Addendum?
Despite the fact that addendums concern various circumstances, they have quite a similar structure. Here are the main components you will find in every addendum to a real estate purchase contract:
At the top of the page, there should be an effective date when the document was created.
The buyer who was mentioned in the original contract should be indicated in the addendum. Their personal data such as their name should be specified at the beginning of the document.
The seller that was one of the parties to the original purchase agreement should be mentioned as well.
Date of the original purchase agreement
Another important piece of information is some details about the original purchase agreement. The addendum should mention the date of the original contract, typically in its first paragraph.
The physical address of the property to be sold should also be included in the body of the addendum.
Changes to be made
The parties involved should explicitly describe in the addendum what new terms and conditions they want to incorporate.
The addendum should end with the signatures of the parties. It is important to include their print names and dates of signing the addendum.