The Basics of a Purchase and Sale Agreement
Navigating the Washington State Purchase and Sale Agreement Addendum
The Washington State Purchase and Sale Agreement Addendum is a standard real estate document used in conjunction with a Purchase and Sale Agreement governing the sale or purchase of real property. The purpose and intent of this Agreement is to add protection to both Seller’s and Buyer’s regarding contingencies regarding the sale.
A Purchase and Sale Agreement is a contract between the buyer and seller of real property that outlines the basic terms of the sale, including the purchase price, the closing date, and the closing costs. The Purchase and Sale Agreement serves as evidence of the buyer’s offer to purchase the property and the seller’s acceptance of those terms. The document should provide specific information about the sale, such as the names of the parties involved, a description of the property being sold, information about how the transaction will be financed, any seller concessions being provided, and any other information relevant to the sale.
The Purchase and Sale Agreement also outlines the responsibilities of both the buyer and the seller. For example, it may specify that the buyer is responsible for paying for certain closing costs, or that the seller must provide certain disclosures about the property. It may also outline the process for transferring ownership of the property, including any required inspections, appraisals , and title searches.
A Purchase and Sale Agreement may not include provisions that the parties have agreed to separately, but it should list all of the documents that are included with it. The Agreement should also specify how any other agreements or documents can be amended, changed, or terminated.
The Purchase and Sale Agreement includes several important components. These components include a description of the property being sold, the purchase price, the method of financing, and any contingencies. It may also specify seller concessions, the process for transferring ownership, and the responsibilities of the buyer and seller.
Another important aspect of the Purchase and Sale Agreement is its terms regarding inspection contingencies. One of the primary responsibilities of a buyer’s agent when helping a potential buyer explore the possibility of purchasing real property is to inform the buyer of the possible defects and issues with the property. Ultimately, it is up to the buyer to decide whether to proceed with the sale of the property or to terminate the process.
Finally, the Purchase and Sale Agreement will contain several miscellaneous provisions. These provisions address issues that weren’t covered in other sections, or that need additional information. They cover a variety of topics, such as dispute resolution, attorneys’ fees, and the consequences of a party failing to perform their obligations under the Agreement.
What is a Real Estate Contract Addendum?
An addendum is a real estate term that basically means "the addition of something to what already exists." However, it may not refer to any old addition to the real estate contract, but to something that adds to an existing contract and changes or supplements it. Also, an addendum may be called an endorsement, appendix, schedule, exhibit, or rider. In the context of a Washington State Purchase and Sale Agreement, an addendum is an addendum – in other words, it doesn’t really matter what it’s called.
There are two types of addenda: pre-printed and handwritten. Pre-printed addenda are the standard addenda that are created by the Northwest Multiple Listing Service (NWMLS) and available in the "addenda & forms" section of the listing. Handwritten addenda are those that are not pre-printed. They may be completely handwritten or written on the blank lines in a pre-printed addendum (though this last method can be easier said than done and is rarely used if a pre-printed addendum is available).
In Washington State, a standard Purchase and Sale Agreement (PSA) may have any number of addenda attached to it. They may also refer to addenda from forms that are made part of the PSA by a reference in the PSA, such as a loan and financing addendum. You may also see the word rider used to mean an addendum – it is just a term that may be more commonly used in other states. These addenda may modify almost everything about the PSA from the price to the closing date and anything in between and even after the close of sale.
Accordingly, an addendum is an important way to state the real estate terms of a deal in more detail than may be possible with a one-page purchase and sale agreement. So naturally, it’s important for sellers, buyers and their respective realtors and attorneys and indeed all parties interested in a transaction to understand how the addenda in a Washington State Purchase and Sale Agreement work.
Common Types of WSP Addenda and How to Use Them in Washington State
The use of addenda is common in real estate transactions in Washington state and they are added to the standard Purchase and Sale Agreement to cover a range of topics. A financing addendum covers the buyer’s financing of home purchases in case their lender requires changes or adjustments. The inspection addendum is used to limit the scope of an inspection. The title review addendum allows for sellers to review title documents so they understand what is or is not covered by their current title policy and it allows them to address any defects to their title that may show up during closing. Homeowners Association addenda is often added in communities that are governed by homeowners associations. It requires the seller to provide members of the association information pertinent to the governing document of the association. The Form 22E is very common in King County. This Addendum is used when there is a home being sold "AS-IS". In this Addendum the seller requires the buyer to remove their contingencies to their satisfaction and acknowledges that the property seller is not responsible to provide upgrades, repairs, improvements, warranties, etc. per the inspection report.
How to Write a Purchase and Sale Agreement Addendum
When drafting a Washington State Purchase and Sale Agreement (PSA) addendum, it is essential for real estate professionals to ensure its accuracy and relevance to the specific transaction. An addendum serves as an amendment or modification to the original PSA, clarifying or superceding specific terms to avoid potential disputes later on.
To begin, the PSA addendum should include both the names of the parties involved and the property address. The purpose of the addendum should be clearly stated at or near the beginning of the document, so that the parties are immediately aware of its goal. All relevant dates – including the date of the original contract, contingency deadlines, and closing dates – must have clarity in the context of the addendum. Following the introductory portion of the addendum are the specific provisions that modify the original terms of the PSA, which must be numbered and listed in chronological order.
The addendum must be signed by all parties involved. As a final step, the parties can formalize the documents with the confirmation, via email or other method, that all parties are in agreement with the addendum provisions. The addendum process is rather straightforward; however, oftentimes, the information surrounding the contract’s objectives and the problems it addresses tend to be less clear. It is highly recommended to contact a seasoned broker for assistance when drafting a PSA addendum.
Legality of Addenda in Washington State
Addenda are legally enforceable documents and should be executed like any other legal contract in order to be binding. Verbal agreement is not enough, and if an addendum is not signed, the onus remains on the buyer and seller to prove its terms and agreement. The seller cannot be held liable for any promises they did not make and did not put into writing when executing the addendum.
In Washington State, any changes to a signed purchase and sale agreement can be made by executing a legally binding addendum. When completing a contract, there are times when buyers and sellers want to change or add to the purchase and sale agreement after the execution of the original contract. This usually occurs when a buyer wishes to implement or amend an inspection contingency, when a seller offers to make repairs, when contingencies are added after an initial offer has already been made, etc . For the changes to be binding, both the buyer and seller must sign the addendum and agree to the new terms. A buyer cannot simply resign a purchase and sale agreement because they wish to make changes that were not agreed upon during the initial negotiation process.
Any addendum that does not state otherwise will take priority over language found in the original agreement. This means that the changes stated in the addendum will supercede the corresponding language in the purchase and sale agreement. Language that is confused, incorrect, or ambiguous may result in litigation.
Even if an addendum is not executed by all parties, all parties are still expected to fulfill the obligations of the addendum in good faith. For example, if the seller agrees to make repairs in an addendum but does not perform the repairs, the buyer would still have grounds to sue for breach.
Tips for Using Addenda as a Buyer or Seller
Purchase and Sale Agreements (PSA) in Washington State can be complex contracts that often require the use of addenda. If used properly, an addendum can streamline the process and provide necessary information and contractual protections that the PSA alone may not provide.
For Buyers:
• Seek a separate addendum to clarify necessary contingencies or provisions that have been omitted from the PSA.
• Cover all bases. Buyers should be as diligent as possible when it comes to contingent status of the sale. A financing addendum may be necessary, especially for sellers who are under the impression that a buyer’s PMI coverage will be sufficient. The buyer should confirm that the lender and seller are both in agreement on whether particular ads are needed before the financing contingency is lifted.
• Confirm necessary deadlines with an addendum. Omitting an important deadline, such as financing or inspection, can be disastrous for the buyer.
• Be aware of your obligations to provide particular documentation at the time of the signing and allow time for sellers to review these documents.
For Sellers:
• Confirm, and clarify where necessary, the relevance of general terms and conditions in a PSA. An addendum can help ensure that the seller receives the maximum net proceeds from the sale.
• Confirm the amount of buyer deposits and what escrow agency will hold them. If there are issues with the buyer, this agency will act as an intermediary and reduce the chance of a costly legal dispute between buyer and seller.
• Be explicit about what repairs you will not make before closing. This will allow buyers to decide if they want to proceed with a sale even though they may have to take on the responsibility of repairs themselves.
Common Questions About Real Estate Addenda
Can an addendum change everything about the agreement?
Yes, an addendum can change everything about the agreement but any changes are not valid until all parties sign the addendum. A dated signature on an addendum generally overrides an earlier-dated signature confirming that the agreement has been changed.
What if there are changes to the home after the agreement has been signed?
If damage occurs to the property after the agreement has been signed , it is important to address those with both parties before closing to ensure the terms of the agreement are fulfilled.
Who must sign the addendum?
All parties who signed the original agreement must also sign the addendum for it to be valid. Depending on the state, the addendum may not necessarily need to be notarized to be valid.
Why would an addendum be used instead of a new agreement?
An addendum is a legally binding document used in residential and commercial real estate transactions that is less expensive than creating a new agreement.