Amendment vs Addendum - C.A.R. Forms AEA/ADM
Most real estate professionals are pretty familiar with the use of an Addendum, offered by the California Association of Realtors (C.A.R. form ADM). We’ve had them at our reach for years to use for an array of transactional changes. You would most often find them used to make contractual changes, like price a reduction and credits, however, they are also used to supplement other documents, such as providing additional information to a disclosure, making clerical revisions or even just having additional writing space, as needed.
Although Addendums were working well in these capacities, they were not technically meeting the legal language needs of contractual changes. So, in 2017, C.A.R. decided to prepare a more suitable form, the Amendment of Existing Agreement (form A.E.A.).
What is the difference between an Amendment and an Addendum? In short, Amendments are to be used to make contractual changes and Addendums can be used for anything else.
At the top of an Amendment, the default document it is incorporated into is the Purchase Agreement. There are also other choices to select; a Residential Lease or Month-to-Month Rental Agreement or Other Agreement. You’ll notice that these default choices are all contractual documents. The word agreement throughout this section is a pretty good indicator that it is best used for contractual changes.
Amendments also have two key features;
First, they include an expiration date if they’re not agreed to by all parties within the specified time, similar to the language and action on a C.A.R. Counter Offer.
Secondly, they include an option to not be accepted at all.
Now, Addendums are typically used to provide contractual changes and revisions, however, their real advantage is that they can used for any change or revision, including those that are non-contractual. I like to say that they’re essentially like a blank piece of paper in that they can be incorporated into any other document that is a part of the transaction. Like the Amendment, it has options to select which document it is being incorporated into at the top, however, you’ll notice the Other box does not include the word agreement at the end of the blank line. This indicates that you can insert essentially any other original document in this space, the options really are endless.
So which is best to use?
In my opinion, because of the default language at the top of the forms, I typically would recommend an Amendment be used for contractual changes to the Purchase Agreement, particularly those that could be considered negotiable, and I’d recommend an Addendum for any other change to be made.
For example, let’s say a new purchase price has been negotiated between the Buyer and Seller, or perhaps the Seller has agreed to provide the Buyer with a credit toward their closing costs… I’d say the best form to use in either of these scenarios would be an Amendment. It will give the opportunity to be accepted or declined, but it would also expire if not signed and returned within the time allotted.
If perhaps there is just a simple zip code change or a correction to the spelling of someone’s name, an Addendum would be the most suitable option to use to make the corrections as they are really more for correcting an error that is considered non-negotiable and there is likely very little chance that it would need to be declined.
Now this point is the very reason why I, as a real estate transaction coordinator, recommend to always use the most appropriate form for the revision being made. As a TC, it is not ideal to have an Addendum in a file that has not been fully executed. Because addendums do not have language to support them not being signed by both parties, they can become an issue at a later time so we want to be sure that we use the most appropriate form when possible and ensure that that form is fully executed by all parties.
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