When a buyer and seller sign a real estate Purchase Agreement, that agreement establishes the terms of the transaction. But a lot can happen between an accepted offer and closing. Sometimes dates need to change, repairs need to be addressed, personal property needs to be clarified, or the buyer and seller agree to another change that was not part of the original agreement.
That is where a real estate Addendum may come into the transaction. An Addendum provides a way to put additional or revised terms in writing so both parties can clearly see what has been agreed to.
If you are buying or selling a home in Michigan, understanding an Addendum before you sign it can help you recognize what is changing, what remains the same, and how the new terms fit with the original Purchase Agreement. On this page, I’ll walk through the Addendum in plain English and explain the important points buyers and sellers should understand
What Is a Real Estate Addendum?
A real estate Addendum is a written document used to add to, change, or clarify terms of an existing real estate agreement.
Rather than relying on a conversation, text message, or verbal understanding, the Addendum provides a written record of the additional or revised terms the parties have agreed to.
Once the Addendum has been properly completed and agreed to by the parties, it becomes part of the transaction documents and should be read together with the original Purchase Agreement.
Why Would a Buyer and Seller Use an Addendum?
Real estate transactions can change between the time an offer is accepted and the day the transaction closes.
A buyer and seller might agree to change a deadline, address an inspection-related issue, clarify repairs, modify possession arrangements, address personal property, or make another change to the original agreement.
The Addendum gives the parties a place to clearly document those changes so everyone can refer back to the same written terms as the transaction moves forward.
What Information Is Included in an Addendum?
The Addendum should identify the transaction it relates to and clearly state the additional or revised terms being agreed to.
Because an Addendum can be used for many different situations, the actual language written into the document can vary considerably from one transaction to another.
That makes the wording especially important. Before signing, buyers and sellers should make sure the written language reflects what they believe they have agreed to.
Does an Addendum Replace the Original Purchase Agreement?
An Addendum generally works with the existing Purchase Agreement rather than replacing the entire agreement.
The original Purchase Agreement remains important. The Addendum documents the specific terms that are being added, changed, or clarified.
As you review an Addendum, think of the two documents together. The Purchase Agreement establishes the original terms, while the Addendum identifies the changes or additional terms agreed to afterward.
When Does an Addendum Become Part of the Agreement?
An Addendum is intended to document terms agreed to by the parties involved in the transaction.
Simply proposing an Addendum does not necessarily mean the proposed change has been accepted. Buyers and sellers should pay attention to the signatures and other requirements of the document before assuming that a proposed change has become part of their agreement.
Once the parties have agreed to the Addendum, it should be kept with the original Purchase Agreement and the other transaction documents.
What Should Buyers and Sellers Review Before Signing?
Read the actual language carefully and compare it with the original Purchase Agreement.
Make sure you understand what is being changed or added, whether any dates or deadlines are affected, and whether the new language changes another part of the transaction.
If something in an Addendum is unclear or raises a legal question about your rights or obligations, getting appropriate professional advice before signing can help you make an informed decision.
Why Work With Doug Hansen?
Real estate forms can be much easier to understand when someone takes the time to explain what you are looking at and how the documents fit into the overall transaction.
With more than 35 years of real estate experience, I help buyers and sellers understand the process, the documents involved, and what to expect as they move from one step of the transaction to the next.
Frequently Asked Questions About a Michigan Real Estate Addendum
What is a real estate Addendum?
A real estate Addendum is a written document used to add to, change, or clarify terms of an existing real estate agreement.
Why would a buyer and seller use an Addendum?
An Addendum may be used when the parties agree to change or add terms after the original agreement has been signed. This could involve deadlines, repairs, possession, personal property, or other transaction-specific terms.
Does an Addendum replace the original Purchase Agreement?
Generally, no. The Addendum works with the existing Purchase Agreement and documents the additional, revised, or clarified terms agreed to by the parties.
Does an Addendum need to be signed by both the buyer and seller?
When an Addendum changes terms requiring agreement between the buyer and seller, the parties need to agree to those changes according to the requirements of the transaction documents. A proposed Addendum should not automatically be treated as an accepted change.
Should I read the Purchase Agreement again before signing an Addendum?
Yes. Reviewing the Addendum together with the original Purchase Agreement can help you understand exactly what is changing and which original terms remain in effect.
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