Addendum In Real Estate

Definition of "Addendum in Real Estate"

Written by

Jesse DeLaGarza

All City Real Estate

The addendum definition is an attachment, clause, or section added to an agreement or contract specifying additional terms, conditions, or requirements to the original agreement or contract. When a contract or agreement needs to be updated or changed, the parties involved use addendums. These can modify clauses in the contract, timelines, or expenses; they can clarify some sections or nullify portions of the original document. For addendums to be considered in effect, they have to be signed by all parties involved and might even require a witness.

Addendums can be applied to any type of contract or agreement. They can extend the period of the contract, alter payments, or change the payment schedule. In the work field, addendums can be used to increase salaries, add or remove benefits, and much more. 

What is an Addendum in Real Estate?

A real estate addendum is used to include additional terms and conditions to the purchase contract. When the buyer is interested in purchasing a home, the sale and purchase agreement (SPA)  is the document that specifies that one individual is selling the home to another for the price specified. The SPA works as a guideline for the negotiation and mentions information such as deposits made during the negotiation and requirements already met. The addendum is used to record requirements that have not been met but are detrimental to the whole agreement. These can void the contract if not met or change the terms and conditions of the contract.

Addendums can be explanatory, informational, or indicative of other requirements that have not been met when the contract was signed. This document is signed and attached to the SPA when they are prepared. An addendum is different from an amendment while often mistaken for one. An amendment modifies the terms and conditions of a contract that is accepted. The addendum changes the terms and conditions of a contract that is yet to be accepted. Addendums are added to the contract and done at the same time; amendments are done later. 

Examples of Addendums in Real Estate

During the negotiations, the buyer expresses their desire to open an at-home bakery. Still, the documents available at the time does not state whether the zoning ordinances allow that or not. When the contract is written, this part is not mentioned as the indication would void the whole contract as the buyer is determined to start the bakery. 

The real estate agent will prepare an addendum to specify this and mention how this requirement annuls the contract. If both parties, buyer, and seller, agree, they sign the addendum and the contract. In case the zoning ordinances don’t allow an at-home bakery in the area, the contract can be voided.