What Is a House Addendum?

Sometimes, when you want to buy or sell a home, you need protections that aren't covered in simple purchase contracts. An addendum, or contingency, provides that protection. An addendum to a home sale contract is anything extra that the buyer or seller includes beyond the common language in a basic purchase agreement.

Common Buyer Addenda

Buyers often include a few important addenda when making offers to purchase a property. One is a contingency for loan financing. Typically, you don't get final approval on a home loan until your contract is in place. (This addendum lets you out of the contract anyway if you can't pay.) When you buy a home, your real estate agent will probably recommend a home inspection addendum as well. This allows you an "out" if your inspector points out major issues with the home. Additionally, if you have a home for sale, you could include a contingency that your agreement to purchase is contingent on your home selling by a certain date.

Other Examples

Buyers can get creative when presenting a purchase contract, thinking that a seller won't hassle over small things in agreeing to a home sale. Some buyers ask that certain personal items stay with the home that aren't commonly included. Refrigerators, dishwashers, washers/dryers and other appliances, lawn furniture and decor are common examples of addenda in this case. Asking the seller to cover one year's cost for home protection insurance is another addendum many buyers use. You could also ask the seller to cover part of your closing costs on your loan.

Risks

As a buyer, be careful that you don't get too crafty or go overboard with contingencies, and risk alienating the seller to the point that he refuses your offer. Some sellers can get emotional when offended. In general, the stronger your position as the buyer, the more room you have to negotiate addenda. If a seller is desperate to make a sale, he won't put up as much of a fuss when you ask for his appliances or a few furniture items. Keep your requests reasonable, though; remember why you want the home in the first place.

Other Considerations

As a buyer, you may encounter seller addenda when attempting to buy a foreclosed property owned by the bank. Banks typically sell these properties with an "as-is" addendum, which states that the buyer must accept the property in its present condition. In this case, you are required to sign a waiver of seller disclosure and agree that the seller won't cover any repair issues discovered during your home inspection. These risks are the tradeoff for usually getting a better purchase price on foreclosed properties.

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.