Dealing with Addenda After Contract is Signed

Signing a real estate contract may feel like the end of the process, but that doesn’t mean situations cannot arise afterward. After this initial agreement, either party may want to make changes. These changes come in the form of addenda. Addenda are official changes to the contract that both the buyer and seller agree upon after the original contract is signed. They can range from minor adjustments to significant alterations that affect the entire deal. It's a step that ensures both parties' needs are met even after reaching an agreement. Proper handling of this addenda is crucial for a transaction to proceed smoothly.

The Importance of Communicating Changes 

One of the most important elements is that both parties should communicate any addenda to everyone involved in the real estate transaction—especially the title company. Missing an addendum is a common issue that creates more severe ones later. It also leads to confusion at the closing table. For example, after an inspection, the buyer and seller may agree on a $5,000 credit at closing. If this agreement is not adequately documented and communicated, questions like "Where was the $5,000 credit?" can arise, causing delays and frustration. To avoid surprises, buyers, sellers, and agents must ensure that all agreed-upon changes are documented and shared with the title company. 

This communication is a courtesy and necessary to ensure the closing proceeds. Significant issues surface without clear communication, potentially derailing the closing process. It falls upon all parties involved to keep the lines of communication open and transparent. Ensuring that every addendum is accounted for can prevent the kind of last-minute chaos that leads to heightened tensions at the closing table. Remember, an addendum forgotten is a problem created; always ensure full disclosure to the title company.

Overlooking Credits 

Another critical aspect to consider is how credits to the buyer, like the $5,000 agreed upon post-inspection, can impact the buyer's loan approval. Lenders often have strict guidelines about credits given after a loan application has been submitted. They may view these credits as changes to the financial agreement, necessitating a review of the loan underwriting. This could lead to delays, with the loan going back to underwriting, or in some cases, parties may choose to forego the credit to avoid complications with the loan approval process. All parties need to understand the lender's perspective and guidelines on credits to work through these changes effectively. 

The delicate balance between satisfying the contractual agreements and adhering to the lender's requirements is challenging. Credits are a tool for negotiating and making a deal more appealing, but they must be handled carefully. The decision to include a credit in the deal after the initial contract has been signed can have far-reaching implications. It's not just about agreeing on a figure; it's about ensuring that this agreement doesn't inadvertently jeopardize the deal's financing. Buyers and sellers must be aware that what seems like a simple agreement can lead to complex issues with lenders, possibly requiring the transaction to be reevaluated.

Schedule a Consultation with Spectrum Title Services, LLC

Real estate transactions can be complex, and addenda are a standard part of the process. If you're involved in a real estate deal and need guidance on handling addenda, scheduling a consultation with a professional can provide clarity and ensure a smooth transaction. Whether you need help understanding your obligations, communicating changes, or dealing with financial adjustments, a professional consultation can help you manage these aspects effectively. Get a title quote from us today.