Addendum vs Amendment in Real Estate

Addendum vs amendment–what’s the difference?

The addendum and amendment are two important tools related to the Residential Purchase Agreement (RPA). Use an addendum to add or clarify terms that weren’t in the original contract. Use an amendment to change terms that are already part of the signed agreement.

We’ll cover what each does and when to use them.

They are similar but knowing the difference between an addendum vs amendment will help you to use them correctly.

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The Residential Purchase Agreement

Let’s start with the contract also known as the Residential Purchase Agreement. The Residential Purchase Agreement is used to create a legally binding agreement between the buyer and the seller. Within the RPA are all the terms, conditions, and stipulations agreed upon by all parties in the transaction.

Occasionally, these terms may have to be changed or modified. Sometimes the negotiation of terms will continue even after you have a fully executed contract and have opened escrow. This is when the addendum and amendment come into play. Let’s get a little more detailed about what these terms mean and when you would use them.

Addendum in Real Estate

In some cases, you are adding conditions to the contract. When the contract exists and we add something new to the terms, we want to use the addendum.  This addition could be the inclusion of real property or the addition of an inspection or report. Just remember, when we ADD to the contract, we use the ADDendum.

For example, let’s say during the escrow process there’s some damage to the carpets done by the pet or child of the seller. The seller agrees to then add a $5,000 credit for new carpet at the close of escrow. Because you’re introducing a new seller credit, document it in writing. If it affects price or net proceeds, many brokerages (especially in California) record it on an amendment; some use an addendum for truly new clauses. Follow your broker’s practice.

Amendment in Real Estate

Other times, you may be amending terms within the contract. Amend means to change or modify. Let’s talk about the RPA again. So we’re starting with the agreement of terms and conditions.  Now you want to take something out or change something within the terms. In this case, we’re going to use the amendment.

So, a good example of when to use an amendment would be if you wanted to take something out of the agreed terms. Maybe the seller originally agreed to include the living room furniture in the purchase. The original agreement included the sofa, coffee table, love seat, and recliner.  But, now, the seller has second thoughts about the recliner for sentimental reasons. You would then use an amendment to change the terms omitting the chair.

California note: Use C.A.R. Form ADM (Addendum) when adding terms, and C.A.R. Form AEA (Amendment of Existing Agreement Terms) when modifying terms in a signed agreement. Your brokerage may have specific guidance—follow that.

Addendum vs Amendment: When to Use Them

There may be situations where you may not be sure whether to use the addendum vs amendment. There could be times where you’re both adding as well as changing conditions that already exist. How do you categorize this?  It seems to get tricky at this point.

What form do you use?

Use an addendum when you need to add or clarify terms that weren’t in the original agreement (it supplements the contract). Use an amendment when you’re changing terms that are already part of the signed agreement—like price, dates, included items, or contingencies (it modifies the contract). If your change both adds and modifies, document the modifications with an amendment and, if needed, add a short addendum for truly new clauses.

Use an addendum to list new inclusions or exclusions that weren’t addressed in the original agreement (for example, adding a home-warranty clause or specifying personal property that wasn’t mentioned).

If you need to remove or change something the parties already agreed to—like taking out an item that was included—use an amendment. Being specific avoids misunderstandings.

Examples of Using Addendums in Contracts

Simply writing in, “Buyer wants all the real property in the home” is too vague. This could cause potential issues between parties so get specific and clearly outline all the buyer wants.

For instance:

• Sofa in the living room to stay

• Recliner excluded from living room furniture

• Table with all 4 chairs in the dining room to remain

• All bedroom furniture to remain at the close of escrow

• The bed with headboard

• 2 nightstands

• 2 dresser drawers

• Rocking chair

As you can see, this is clear and more detailed leaving no doubt what the buyer is requesting from the seller.  

Now that we know more about the differences between the addendum vs amendment and how to use them, what do we do with these changes?

The Escrow Instructions and Addendum vs Amendment

Escrow implements signed written instructions. If you’re changing the purchase agreement, memorialize those changes on a contract amendment and have all parties sign. Escrow may also prepare amended escrow instructions, but those changes are effective only when all principals sign.

After the amendment or addendum is fully executed, provide it to escrow so the file reflects the updated agreement and instructions.

Final Thoughts

The addendum and amendment are great sidekicks to the Residential Purchase Agreement. In real estate, you never know what’s going to happen during a transaction and the most well-written contract may need to be changed or modified. Even the Constitution has amendments!  

So, remember that when you add to the contract, use the addendum. When you’re removing from or changing the contract, use the amendment.

When you’re not sure which document applies, confirm with your broker or a real-estate attorney—don’t default to one or the other. Escrow will follow signed instructions once the correct form is executed.

As an agent, what’s the most creative item you’ve had to put on an addendum in a transaction?  Share it with us!