The COVID-19 pandemic, caused by the spread of the novel coronavirus, has sent shockwaves through most of the U.S. economy. Real estate is no exception as social distancing measures have made it extremely hard for real estate agents to show homes to prospective buyers, and getting both parties together at a closing table can be next to impossible right now.
In order to help keep real estate markets operating during this turbulent and uncertain time, real estate organizations in several jurisdictions have created a coronavirus addendum to be used in real estate contracts. Here's what these legal documents do, and why they're important.
Why might you need a coronavirus addendum?
As stated in the California Association of Realtors' coronavirus addendum, the coronavirus pandemic has had "unprecedented impacts on real estate transactions, including, but not limited to, travel restrictions, self-imposed and governmentally required isolations, and closures of both government and private offices required to fund, close and record real estate transactions."
In other words, if someone needs to fly a long distance to close on a property, they may not be able to do so. If someone is required to shelter in place, as California residents are right now, they could miss contractual deadlines through no fault of their own. And even if they could get to a closing on time, the closing attorney's office is likely to be closed. In a nutshell, completing a real estate transaction as scheduled is impossible in many parts of the U.S. while the coronavirus outbreak is ongoing.
What does the coronavirus addendum say?
The short version is that the California Association of Realtors' coronavirus addendum spells out what will happen if either the buyer or seller is unable to close a real estate transaction on account of any circumstances related to the COVID-19 pandemic.
- First, it provides for a postponement of closing of escrow for up to 30 days (or another specified period), after which either party can cancel the contract without penalty.
- It also contains an optional provision that allows for either party to cancel the contract without penalty if the buyer can no longer get financing because of a COVID-19 related income or job loss.
- Finally, the addendum contains another checkbox that simply allows both parties to mutually cancel the purchase agreement.
In addition, there's also a blank space where any other conditions or coronavirus-related modifications can be made.
Other markets have coronavirus addendums as well
We're seeing similar addendums trickle out from other states and local areas, too. Just to name a few, there are now coronavirus addendums from Texas Realtors, Florida Realtors, the New York State Association of Realtors, Virginia Realtors, and the Chicago Association of Realtors. There are several others currently in existence as well, and while the wording and scope vary among them, they all contain generally similar provisions to California's addendum. Some go a step further, like Florida's, which provides options to extend the financing period, inspection period, title cure period, and more, in addition to extending the closing date.
In these uncertain times, a coronavirus addendum can give important financial and legal protection to buyers and sellers. Going forward, it will be surprising if most other real estate markets don't follow suit in the near future and issue coronavirus addendums of their own to use with real estate contracts that are in danger of not being able to close on time.