Almost every Purchase and Sale Agreement will have at least one addendum attached to it.
Some addendum’s are required by law. Others are optional. Below is a list of the most commonly used P&S addendum’s:
This document is added to the P&S when the buyer is getting a mortgage to purchase the property. It states that the seller’s agent or attorney will provide the buyer’s attorney with all numbers needed to prepare the closing documents well before the scheduled closing date (in compliance with mortgage-lending regulations). These numbers include the payoff statement for the seller’s mortgage (if applicable), the final water bill, the amount of fuel begin transferred with the property, etc. Both sides also agree to extend the closing date if necessary.
Title V Addendum:
If the property being sold is serviced by a septic system, the parties must sign a Title V Addendum. The parties will both acknowledge that the property contains a septic tank and that the seller must have the tank inspected prior to the closing. Typically the seller will agree to pay up to $10,000 to repair the tank if it fails inspection. If the repair costs exceed that amount, the parties may cancel the deal without any legal liability.
Many lawyers will add their personalized addendums to the P&S. This document is usually labeled simply as “Addendum A”. These addendums should be given extra scrutiny for a couple reasons. First, they often supersede the terms of the standardized P&S. So if the P&S terms conflict with the addendum’s terms, the addendum will take precedence. Next, they usually put one side at a disadvantage. Of course the attorney insisting on the addendum will want only terms favorable to his client and unfavorable to the other side. These addendums often add little value to the contract and can, at times, create unnecessary hostility between the parties.
If you have any questions about real estate law, please contact me at justin@jrmccarthy.com.
