Importance of Addendum in Real Estate Investments

Addendums (also known as Added Provisions to the Purchase and Sale Contracts in real estate investments) are a common place to modify a particular issue that a buyer or seller wants to clarify. The significance of an addendum can’t be downplayed. However, you should first know how they work and why they are so popular before you simply download a contract addendum template.

When you add an addendum or clause, they override the standard language of your contract. In a few cases, an addendum may not add a language in the contract while in other cases, it may override it. In bank-owned property investments/sales, the seller of the property or lender will use his own addendum, covering all the major aspects of a contract offered by the buyer. It has a lead-based paint clause, required by the Federal Law for houses that have been built before 1978.

It is wiser to add an addendum to your contract than pinpointing phrases or sentences in the contract and then getting the related parties to sign the strikeouts and add-ins. They might be illegal later, and any of the party can protest against what they signed. So it’s advisable to do it beforehand, in the presence of all associated parties.

The majority of real estate contracts carry added clauses that are different from the standard contract clauses or paragraphs. The clauses can be about the closing and title agent or particular items that will remain with the property post the deal. It may also include info on the disposition of EMD (Earnest Money Deposit) in case the buyer doesn’t close the deal, any extended period for which the seller will be in the property, or anything different than the standard contract’s terms.

You can also use a contract addendum template for an idea or as a base. However, you will need to add some more points of consideration and clauses, depending on your specific need. As an easier option, you can consult an expert company like the Chronos Solutions that will help you with a custom addendum to contract.

The primary difference between an addendum and a clause is the length of additional sentences and whether they can be placed in the contract. If the length exceeds a sentence or can’t fit in the ‘Clause Section’ of the original agreement, you will need to add an Addendum on a different page at the end.

Make sure to go through your contract thoroughly every time and let an attorney or reliable company of your choice interpret all the clauses clearly to you. This might take a little money, yet it’s worth the total money you’re going to invest.