![\"Add](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2020\/04\/pandemic-earnest-money-addendum-666x381.png\")
<\/a>Add a COVID-19 real estate addendum<\/h2>\n
When writing your purchase agreement<\/a>, you can add addenda and contingencies that protect yourself. The most common is an inspection contingency<\/a>, but others may apply to financing or a closing date. Realtor associations in many states have begun to offer versions of an addendum<\/a> related to coronavirus that agents can use with clients.<\/p>\n Jason Gorman<\/a> is an experienced agent in Minnesota, where the Realtor association distributed a coronavirus addendum<\/a> to members at the beginning of March. He says that \u201cwe\u2019ve been using it on all of our files to keep everything safe<\/a>. It allows people a grace period to extend closing dates<\/a>.\u201d<\/p>\n He has even been adding it retroactively to pending transactions, as most buyers and sellers have been reasonable and \u201cit\u2019s in everyone\u2019s best interest to have it added.\u201d<\/p>\n Other agents are working with lawyers to draft an addendum. A coronavirus addendum should definitely be included in any new contracts, but they can also be added to contracts already underway to help extend deadlines and protect everybody. As long as everyone agrees on them, you can add them to a signed agreement.<\/p>\n Kelly Springer<\/a>, Esq., is a partner at law firm Willenbring, Dahl, Wocken, and Zimmermann, PLLC, specializing in real estate, probate, and family law. She says that changes to real estate contracts are common, and \u201cfew contracts go all the way through to the end without amendments.\u201d<\/p>\n \u201cSome examples of common changes would be: reductions in purchase price to address defects found in the property inspection, or extensions of the contract to address title issues or other conditions precedent [conditions required to complete the sale].\u201d<\/p>\n Don\u2019t be afraid to ask. Sellers have motivation to work with you. After all, they have the same concerns about moving, a job, or the home they\u2019re buying.<\/p>\n If you\u2019re writing a purchase agreement<\/a> now, or the seller has agreed to add a coronavirus addendum, what should it include? The addendum should address timing, financial worries, and health concerns.<\/p>\n Real estate contracts include timelines for how long the buyer has to get an inspection<\/a>, an appraisal<\/a>, and to close on the house. Depending on your state, you might not be able to get most or all of these things done on the timeline during the pandemic.<\/p>\n In Minnesota, for example, the state considers real estate an essential business and still allows closings and inspections. But in other states, appraisers and inspectors may be considered nonessential, and limitations could therefore apply to their work \u2014 they might have to appraise your home remotely<\/a> or delay the inspection. Title work<\/a> can be completed in an office, but if you can\u2019t find someone to perform an alternative appraisal (or the bank won\u2019t accept anything other than a standard 1004 appraisal), you might have to wait until appraisers can get back to work.<\/p>\n The addendum should specify how much extra time you need to accomplish these tasks, and it should also provide an extension for closing, usually 30 days. If the closing still doesn\u2019t take place after the extension, then the buyer or seller can renegotiate the deal or walk away. If the seller<\/a> walks away, the buyer should get their earnest money back, even in a pandemic.<\/p>\n Maybe you need to back out of the sale because you lost your job. Most purchase agreements should already contain a financing contingency that allows the buyer to back out of the sale if they can\u2019t obtain a mortgage<\/a>.<\/p>\n Since the pandemic started, Gorman says that he has had \u201ca couple of people that have lost jobs on pending transactions, and cancel because weren\u2019t able to obtain financing anymore.\u201d Additional language in a COVID-19 addendum about income and financing may be unnecessary, but if you\u2019re truly worried, talk to your agent and a lawyer.<\/p>\n What if you decide you\u2019d rather cancel the sale and keep your down payment as a nest egg \u2014 just in case? With so much uncertainty, keeping that money in the bank could feel safer. Many buyers struggle with buyer\u2019s remorse when they see such a large sum go out of their bank account. Unfortunately, it\u2019s unlikely that the addendum would protect you in this case, and you\u2019d probably lose your earnest money.<\/p>\n There could be a clause in the contract about what happens if a buyer or seller passes away during the transaction, which could (unfortunately) apply in this situation as well. However, these clauses usually relate to estates and probate deals and typically only delay a sale. If you have a signed and executed contract, you may have equitable title to the house, while the seller\u2019s estate now has legal title.<\/p>\n Equitable title means that you have a right to obtain full ownership of a property (or property interest), and the seller\u2019s estate or heirs must still sell it to you. Legal title, or land ownership, transfers at the final sale. If the seller passes from the coronavirus during the sale, without a COVID-19 addendum, at most, the closing would be delayed.<\/p>\n That\u2019s if their heirs want to proceed in selling the house. In Springer\u2019s experience, \u201cthe contract may need to be extended until someone can be legally appointed as administrator of the estate, so they have authority to transfer good title.\u201d If they were unhappy about the sale, they might be willing to negotiate terminating the contract and returning your earnest money.<\/p>\n If the seller knows that they have been exposed to or have COVID-19 and don\u2019t disclose that to the buyer, it could potentially nullify the contract in some states. At least one state \u2014 Texas<\/a> \u2014 has advised sellers that COVID-19 counts as a \u201cknown health hazard,\u201d and they must disclose if they know they have it.<\/p>\n Sellers usually have to disclose any known health risks related to the home in states where a seller\u2019s disclosure is required, such as the presence of lead paint, gas leaks, asbestos, or other property defects. They don\u2019t necessarily address the current occupant\u2019s health condition. While you may be certain that the presence of COVID-19 definitely qualifies (or definitely does not qualify) as a known health risk, it\u2019s legally open to interpretation.<\/p>\n Generally speaking, you can\u2019t terminate a contract based on a diagnosis (and get your earnest money back) unless the seller has withheld information about the house. You may be in a gray area, and you should consult with an attorney, if the diagnosis came after executing the purchase agreement<\/a>.<\/p>\n If you are already under contract, don\u2019t have an addendum, and the seller\u2019s disclosure rules don\u2019t apply to your situation, then you might have to make the choice between getting your earnest money back<\/a> and getting out of the sale. While Gorman says that most sellers have been reasonable, it\u2019s not a guarantee that the seller will agree to adding a post-contract addendum.<\/p>\n![\"Negotiation](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2020\/04\/pandemic-earnest-money-negotiation-666x381.png\")
<\/a>What goes into an addendum?<\/h2>\n
Time constraints<\/h3>\n
Financial problems<\/h3>\n
Health issues<\/h3>\n
![\"Figure](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2020\/04\/pandemic-earnest-money-walk-away-666x381.png\")
<\/a>When should I just walk away?<\/h2>\n