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If you're buying or selling a piece of real estate, you may be asked to sign an amendment or addendum or two along the way. While both mean a change to your overall agreement with the other party, there are some key differences in how the two work -- and specifically, what they mean for the original contract.
It's important to understand how these two documents differ before signing on that dotted line.
What is a contract addendum?
A contract addendum adds something to the original purchase agreement. It's a separate document that, once signed, becomes a part of the agreed-upon sales contract -- essentially just another page of it.
Addendums can be created by anyone involved in the transaction, including the buyer, seller, title company, etc. For it to be legally binding, both parties need to sign the addendum document, and a note should be added to the original contract (above the original signatures) stating "This document is invalid without Addendum A," (B, C, etc.).
Here are a few common examples of addendums as they pertain to real estate transactions:
- Inspection contingencies, affording the buyer the right to a third-party inspection (home, pest, septic, etc.) prior to closing.
- Sale contingencies, which allow the buyer to back out if they're unable to sell their existing property.
- Financing-related addendums, including those regarding loan assumptions, mortgage approvals, and more.
- Disclosures, including property condition disclosures, tax disclosures, environmental hazard disclosures, and more.
- HOA documents, detailing the rules and regulations of the local homeowners association.
- Non-realty item addenda, which states what personal property the seller has agreed to leave for the buyer (appliances, fixtures, window coverings, etc.).
- Back-up contract addenda, which state that the contract only goes into effect if the seller's current contract falls through.
- Buyer additions, if the original buyer wants to add their spouse or partner to the contract.
Contract addendums may also be used in rental situations. If a landlord or tenant wants to add something to their lease later on -- like, perhaps, a pet agreement or a new roommate, these could be agreed upon and finalized using an addendum.
What is a contract amendment?
A contract amendment is a document that modifies the original purchase agreement. It either corrects something on that initial contract or clarifies it with additional information or detail.
Amendments can only be proposed by the signing parties (or their representatives/agents). If an amendment is made via a separate document, the changes to the original contract will need to be spelled out in detail, including what original clauses and portions are being changed and what new text will replace them.
An amendment can also be made by redlining and changing text directly in the original contract. Regardless of how the amendments are approached, both parties must sign and agree to the changes in writing.
Here are some scenarios when you might need an amendment in real estate:
- The sale price is changing.
- You're requesting repairs or repair credits.
- There's a title or appraisal issue.
- There's a new closing date.
- The type of financing is changing.
The key differences between an amendment and an addendum
Both amendments and addenda are issued after the original contract has been signed, and both documents aim to modify or further clarify the agreement between two parties.
The differences lie in what those documents mean for the initial contract, as well as who can make the changes and how. Here's a quick breakdown of how the two differ:
|Purpose||Adds something to the original contract.||Modifies or clarifies the original contract.|
|Who can make them||Any party, including third-parties like title companies, etc.||Only the signing parties or their agents.|
|How it's done||By adding an additional document to the original contract.||By redlining the original contract or adding an additional document.|
Finding addenda and amendments for your house or rental
There may be times when you need to reference your contract's addenda and amendments -- even years down the line. Maybe you want them when making a repair (the seller's disclosures can help you determine whether there were any pre-existing problems with a system in the house), or maybe you need the documents as you prepare to re-sell the home or rent it out.
Whatever the reason, you have a few options for finding those documents. You can:
- Pull out your old closing papers. Any addendum or amendment to your contract should have been signed in person on closing day and should be in your final closing packet.
- Contact your real estate agent or title company. Your title company should have the hard files, and your real estate agent likely has the digital ones (if it was in the last 10 years or so).
- Get in touch with your mortgage lender. Your lender or mortgage broker should be able to help, too. At the very least, they can point you to the attorney who reviewed your contract. They may have the files on hand as well.
If you're a renter, you'll have to reach out to your landlord or the real estate agent or attorney who represents them. If a management company handles the property, they may also have access to the contract.
The bottom line
Even though you and the other party (buyer, seller, landlord, whomever) agreed to certain terms at the start, that doesn't mean those terms are set in stone. In a real estate transaction, negotiations, inspections, and title searches can all necessitate an amendment to the original contract, while things like contingencies and disclosures can lead to an addendum.
Landlords and tenants may also need these documents to adjust a pre-existing lease or rental agreement already in place.
Whichever situation you find yourself in, it's important to understand how these documents impact your legally binding contract moving forward. If you're confused or you've been presented with an addendum or amendment you're unsure about, make sure to contact a qualified real estate attorney. They can help point you in the right direction.
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