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3 min read Mar 22, 2024

What Is an Addendum in Real Estate?

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Megha Mulchandani

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Editor
Edited By

Megha Mulchandani

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Megha M. is a content editor who loves to play with words. Apart from this, she is a theater artist and a public speaker who transforms into various personas on stage.

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An addendum in real estate is an additional attachment to the purchase agreement that changes the terms and conditions of the original contract.

In a real estate transaction, only the buyer and seller can modify the purchase agreement through an addendum. Third-party professionals like home inspectors and title companies can also recommend addendums based on what they find.

Addendum in Real Estate

  • Addendums efficiently update terms or conditions in various types of listing agreements.
  • They also require signatures from all parties involved in the negotiation.
  • An addendum is prepared before both parties sign a contract whereas amendments occur after the contract is signed.

How Does an Addendum Work?

If you’re buying a home, an addendum allows for additional requests or conditions that you can add to the original contract. For example, a buyer might request a home inspection contingency or ask for specific repairs.

On the other hand, sellers can use an addendum to include certain items in the sale, like furniture or other appliances. These adjustments are made before both parties sign the final contract.

Types of Addendums

There are various types of addendums in real estate transactions. Some of the most common ones include:

  1. Closing Cost Addendum: In this addendum the buyer requests the seller to contribute financially towards the closing costs.
  2. Repair Addendum: This is when the seller agrees to make specific repairs before the closing date.
  3. Furniture Inclusion Addendum: It specifies that certain furniture or appliances will be included in the sale of the property.
  4. Sale of Buyer’s Home Contingency Addendum: This allows the buyer to proceed with the purchase only if their current home sells within a specific time.
  5. Home Inspection Contingency Addendum: With this addendum, buyers can back out of the contract if the home inspector finds major issues in the inspection.

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Addendums vs Amendments

Imagine you’re buying a house and the home inspection report shows a plumbing issue. The standard contract doesn’t cover repairs, but you want the seller to fix it before the closing date. This is where addendums and amendments come in.

Both are legal documents that are attached to your contract, but they have distinct functions.

Addendums

Addendums add to your contract. They introduce new facts not initially included in it. Addendums don’t change existing terms in the main contract.

They offer flexibility and customization which allows you to address unique cases and contingencies like unexpected repairs.

Amendments

Amendments change terms that already exist within the contract. They are used to modify the closing date due to delays and adjust the purchase price based on new negotiations.

Amendments should be used with caution as they can have legal implications and impact other aspects of the contract. For example, changing the closing date might affect deadlines.

Final Word

Addendums serve as valuable tools for buyers and sellers to address specific conditions or requests that may arise in the negotiation process.

Whether it’s to include additional terms, address contingencies, or modify existing provisions, addendums provide clarity in real estate contracts.

Frequently Asked Questions

What is the purpose of an addendum in real estate?

An addendum in real estate is an additional attachment to a contract that modifies the terms and conditions of the original agreement.

How are addendums different from amendments in real estate contracts?

Addendums are added to the original purchase and sale agreement before both parties sign the contract. Amendments are changes made to the contract after it has been executed and signed by both parties to modify specific terms.

What are some common types of addendums used in real estate transactions?

Some of the common types of addendums are closing cost addendum, repair addendum and home inspection contingency addendum.

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