An addendum for a back-up contract may seem like a legal jargon, but it is an essential document that could save a buyer from a lot of headaches when buying a home. Essentially, a back-up contract is a contract that a buyer signs when a seller has already signed another contract with a different buyer. In such a scenario, the buyer’s contract is placed in a “back-up” position, and if the first buyer fails to close on the property, the back-up contract comes into play.
In such situations, it is essential to have an addendum that covers all the details and potential scenarios that could occur. It is a legal document that outlines the terms and conditions of the back-up contract, and it should be drafted carefully and precisely. Here are some key areas that an addendum for a back-up contract should focus on.
Deadline for Closing
The deadline for closing should be clearly stated in the addendum, and it should be based on the timeline for the primary contract. This means that the buyer must be aware of the original contract’s timeline and deadlines, as their contract will be activated only when the first one falls through.
If the primary contract falls through, the buyer’s contract will become active, and they will have the chance to perform their due diligence on the property. The addendum should specify the time frame for the inspection and the contingencies that will apply.
If the buyer is relying on financing to purchase the property, the addendum should have contingencies in place that take into account the primary contract’s financing terms. If the first contract’s financing fails, the buyer’s financing terms will be activated.
The addendum should clearly state the closing costs applicable to the back-up contract. These costs will depend on the primary contract’s terms, and the buyer must be aware of them.
Earnest Money Deposit
The addendum should also specify the amount of earnest money deposit that the buyer must pay. This deposit is held in escrow and serves as proof of the buyer’s intent to purchase the property.
In conclusion, an addendum for a back-up contract is a crucial document that protects the buyer’s interests in case the primary contract fails. It is a legal document that should be drafted with precision and care. As a professional, it’s essential to ensure that the language used is clear and concise to avoid any confusion or ambiguity.