You must provide the addendum. TREC rules require a license holder to provide the Addendum for Sale of Other Property by Buyer to a buyer who wants to make a contract contingent on the sale of another property. License holders are not allowed to write language into the Special Provisions Paragraph for situations that are covered by a TREC promulgated form, such as the contingency addendum. If your client doesn’t want to use the addendum, you should advise him to consult his attorney to draft language that will reflect his intention.
My client wants to purchase a property and make that contract contingent on the sale of his current home. Do I have to use the Addendum for Sale of Other Property by Buyer, or can I just write this language in the Special Provisions Paragraph of the One to Four Family Residential Contract (Resale)?
Does a buyer always have to use the Addendum for Sale of Other Property by Buyer if she is selling another property?
No. A buyer who can qualify for a loan without having to sell her other property doesn’t need to use the addendum. However, she can still use it if she wants to make the contract contingent on the sale of her other property.
Can a broker modify the Addendum for Sale of Other Property by Buyer when a buyer wants to make the contract contingent on some other event, such as a transfer or receiving probate proceeds?
No. The addendum is drafted for a specific purpose, the sale of another property. Using the addendum for another purpose requires that it be modified by a lawyer. A broker who makes such modifications is likely engaging in the unauthorized practice of law.
If my buyer can’t pay a downpayment or qualify for a specified loan without selling his property first, is it in his best interest to use the Addendum for Sale of Other Property by Buyer?
Yes. If your client’s ability to perform under a contract (i.e., close the transaction) is contingent upon the closing of another property, the Addendum for Sale of Other Property by Buyer (TAR 1908, TREC 10-6) should be made part of the contract. Otherwise, the buyer risks default under the contract if he fails to close because the sale of the other property doesn’t close. Default by the buyer could result in termination of the contract and the loss of earnest money. Alternatively, the seller could also take action to enforce specific performance or other remedies through the legal system, or both.
If a buyer waives the contingency under the Addendum for Sale of Other Property by Buyer, then can’t close, does she get the earnest money back?
No. If the buyer can’t close because the buyer didn’t sell her other property, the buyer will be in default. Paragraph D of the addendum states that if the buyer waives the contingency and then can’t close and fund because she did not receive the property’s proceeds, she is in default and the seller may exercise the remedies in Paragraph 15 of the sales contract. One of the remedies available to the seller is to terminate the contract and keep the earnest money.
My buyer client’s Addendum for Sale of Other Property by Buyer gives him three days after receiving notice from the seller that she has accepted another offer to waive the contingency or his contract will automatically terminate. The contract also contains a 10-day termination option for my client. Two days after the effective date, the seller notified my client that she accepted another offer. Does my client have to waive the contingency within the three-day period, or does he have until the end of the option period to waive the contingency? And if my client waives the contingency, can he still terminate under the option within the 10-day period?
The time periods and rights provided under the contingency addendum and the termination option are completely independent. If the buyer doesn’t waive the contingency within the three days provided for in the addendum, the contract will automatically terminate. His right to terminate within the 10-day termination option period is not diminished by his election to waive the contingency.
My buyer received written notice by the seller that he requires my client to waive her contingency on the sale of her current property or the contract will terminate, as stated in the addendum. Everything is on track with the sale of her current property, so she decided to waive the contingency and gave timely written notice using Notices Regarding Contingency Under Addendum for Sale of Other Property by Buyer (TAR 1912). Now, the seller wants my client to provide proof that the she can obtain her loan even if the sale of her current property doesn’t happen before our closing. Can the seller force my client to do this?
No. The Addendum for Sale of Other Property by Buyer doesn’t require the buyer to provide evidence to support her decision to waive this contingency. The only requirements in the addendum are that the buyer notify the seller in writing within the time stated and deposit the additional earnest money with the escrow agent in a timely manner.
Buyers should consider the risks of waiving this contingency when they don’t already have the proceeds from the sale of another property. A buyer would be in default on her contractual obligations if she waives the contingency and then fails to close solely because she didn’t receive the sale proceeds.