Given the amount of uncertainty right now, agents are quickly adding a special coronavirus addendum to new and existing contracts to provide some breathing room for delays in this fast-changing environment. They\u2019re also relying on new language and forms for listing agreements and property showings.<\/p>\n
We spoke with two agents \u2014 one in the Midwest, and one on the East Coast \u2014 about how they\u2019re using a coronavirus addendum to protect their clients<\/a>, how buyers and sellers are reacting to the change, and what these clauses protect against (and what they don\u2019t). We\u2019ll also point to where you can find guidance on coronavirus clauses in your local market if you\u2019re not sure where to look.<\/p>\n Many types of real estate contracts already have<\/a> what are known as force majeure <\/i>provisions. USLegal<\/a> defines force majeure<\/i> as \u201ca provision in a contract that excuses a party from not performing its contractual obligations that become impossible or impracticable, due to an event or effect that the parties could not have anticipated or controlled.\u201d<\/p>\n According to the American Bar Association, force majeure<\/i> language should generally cover contractual obligations<\/a> that fall through due to the coronavirus \u2014 ever since the World Health Organization<\/a> declared the coronavirus outbreak a pandemic on March 11. That\u2019s because a global pandemic<\/a> falls reasonably within the parameters of what can be considered an unanticipated or uncontrollable event.<\/p>\n However, due to how fast circumstances are changing, and in the spirit of leaving nothing up to interpretation, Realtor associations in many states are providing agents access to addenda specifically referencing the coronavirus.<\/p>\n Zach Kirchoff<\/a>, a Minneapolis-based agent with over 16 years experience, says his firm, Lakes Sotheby\u2019s International Realty, has begun implementing the use of a coronavirus addendum with their purchase agreements. \u201cThe Minnesota Realtors Association <\/a>came out with a COVID-19 clause. It only came out [in mid-March], but we\u2019ve been using it.\u201d<\/p>\n The form, shown below, serves as an addendum or an amendment to purchase agreements in light of the coronavirus disease of 2019, or COVID-19. What this clause outlines allowances for, in a way that differs from standard force majeure<\/i> provisions, is the additional time parties may need to perform their contractual obligations.<\/p>\n Specifically, this coronavirus clause indicates that, \u201cBuyer and Seller understand and acknowledge that the unprecedented global COVID-19 pandemic may make the performance of the Purchase Agreement within the specific timelines set forth impossible or impracticable.\u201d<\/p>\n The addendum doesn\u2019t grant indefinite relaxation of the timeline, however. Buyers and sellers will agree on a deadline extension, with the earnest money either returned to the buyer or forfeited to the seller should the deal fall through.<\/p>\n Even if a deal seems 100% on track, \u201cif you can add the protection, do it,\u201d Kirchoff advises. \u201cThere\u2019s absolutely no harm in asking, and we\u2019ve run into a lot of sellers who are more than open to it.\u201d<\/p>\n With property showings slowing down around the country, sellers are more willing than ever to accommodate nervous buyers.<\/p>\n \u201cWhen we\u2019ve said we have an interested buyer, the sellers are like, \u2018hell yeah, throw in the COVID addendum; you can have my third toe if we get an offer accepted right now!\u2019\u2019\u2019 says Kirchoff.<\/p>\n Though evident in the addendum\u2019s language, it\u2019s worth pointing out that a coronavirus clause isn\u2019t meant to serve as an easy out if a buyer or seller is simply fearful of contracting the virus; the clause is in place to offer flexibility during these times of uncertainty.<\/p>\n Consider the various individuals involved in carrying out the following:<\/p>\n When lockdowns and shelter-in-place orders<\/a> are in effect, businesses and service providers are greatly restricted, and performing certain tasks may be difficult (if not impossible) within the confines of a standard purchase agreement.<\/p>\n By including a coronavirus clause in your purchase agreements that allows both sides to agree on an extension and determine who keeps earnest money if all else fails, you\u2019re protecting both the buyers and sellers involved in the transaction.<\/p>\n The California Association of Realtors (CAR) also has a coronavirus addendum<\/a> available, explaining that the use of such a clause helps eliminate the risk of uncertainty in court, should things come to such an action. \u201cThis form allows parties to agree on a way forward for existing contracts and address potential issues in contracts that have not yet been formed,\u201d CAR\u2019s website explains.<\/p>\n While a coronavirus addendum may now be a valuable addition to your real estate purchase contracts, some agents are involving clauses much earlier in the process.<\/p>\n Daniel Logan<\/a>, a Wilmington, DE agent who\u2019s sold 70% more single family homes than average, and is licensed in Delaware, Maryland, and Pennsylvania, is using an attorney-developed COVID-19 certification prior to showing properties.<\/p>\n The document is signed by all parties present at a showing \u2014 this includes any agents, sellers, as well as the potential buyers \u2014 representing that, to the best of their knowledge, they are not infected with and have not been exposed to the coronavirus.<\/p>\n \u201cIt\u2019s basically a hold harmless<\/a> clause,\u201d explains Logan, acknowledging that showings have slowed considerably for his team in the wake of COVID-19. \u201cNot to sour the juices, but who wants to go into a house when you don\u2019t know what\u2019s been there?\u201d<\/p>\n Similar concern applies for sellers, who, if they\u2019re still living in the house while it\u2019s on the market, must manage the inevitable worries that come with inviting strangers who may or may not be sick into their home.<\/p>\n Logan emphasizes that, while business may be slow for many agents, now is the time for compassion and understanding.<\/p>\n \u201cEverybody’s nerves are on edge, and you can\u2019t push this stuff; it\u2019s not good,\u201d says Logan. \u201cYou can\u2019t force somebody to buy something, and the bottom line is that this is all going to wash out. Keep your clients for the future. It might not work for this one, but let\u2019s remember that there\u2019s always another house for somebody another time.\u201d<\/p>\n Given the concerns with timing, Pennsylvania<\/a> now even has a coronavirus addendum for listing agreements. The clause asks existing sellers to elect (or not) to temporarily remove their property from the market and new sellers to choose whether their listing should begin in \u201ccoming soon\u201d or \u201cactive\u201d status.<\/p>\n News and regulations surrounding the pandemic are changing often, so it\u2019s important to be proactive with your research. At the time of this writing, the National Association of Realtors is regularly updating their website with coronavirus information<\/a>, as well as offering recommendations for facilitating transactions<\/a> during this time.<\/p>\n![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2020\/04\/coronavirus-clauses-real-estate-transactions-666x381.png\"){kind=spacer}
<\/a>What is a coronavirus clause or addendum, and why should you add one to your contracts?<\/h2>\n
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<\/a>When to use a coronavirus clause: Add one until further notice<\/h2>\n
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Coronavirus clauses beyond purchase contracts<\/h3>\n
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<\/a>Where to find the right forms or language to protect your contracts<\/h2>\n