Real Estate Contract Clauses: Amendments & Addenda

Instructor: Tara Schofield

Tara has a PhD in Marketing & Management

A real estate transaction requires a contract to make the transaction legally binding. There are often changes or additions that are needed to the contract. Learn how amendments and addenda affect a sales contract.

What Is a Contract Clause?

Real estate sales contracts have many rules and obligations, called contract clauses, that are outlined for the parties. These statements make up the core of the contract and identify what the buyer and seller are agreeing to. There are many contract clauses in a sales agreement that outline the terms of the contract. Some of these clauses include:

Inclusions and Exclusions

Inclusions and exclusion clauses outlines what will be included with the property and what will not stay. For instance, your client has a lovely dining room set that the buyer has asked to be included in the sale. Your client agrees. The dining room set is added as a clause in the contract stating it will be an inclusion in the sale. Likewise, when the buyer walked through the backyard there was a large playset. The seller intends to take the playset with them, and it is listed as an exclusion because it is not included in the sale of the home.

Earnest money

Earnest money clauses outline how much the buyer needs to put down as a down payment to show he or she is serious about purchasing the home. The earnest money amount is included as a clause in the contract.

Closing Terms

The terms around closing including date, right to extend, and the right to choose a title company are reasonable clauses found in most real estate contracts.

What Is an Amendment?

Your seller and the buyer agreed to terms and signed the sales contract. All of the dates and responsibilities were stated in the original contract. However, the inspection is going to take longer to get scheduled than you expected, and it can't be done by the inspection date in the sale contract. Your client and the buyer both agree to extend the date by a week. You complete an amendment, a change to the original contract that both parties agree to. Your amendment states you are changing one clause in the contract to allow the inspection deadline to be pushed back one week.

What Is an Addendum?

An addendum is a new document or supporting paperwork that is added to an existing contract. Multiple addendums are called addenda. Let's say your sales contract states the buyer will provide proof of funding by a specific date. When the seller gets a letter from the bank stating the mortgage is approved, the letter can be added to the contract to prove the buyer has funding. The letter does not change the terms of the original contract, as with an amendment. The letter is added to the file as a required form.

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