Release Date: 04/11/2017
QUESTION: I recently submitted a signed offer to a listing agent. When the contract was returned to us, a box was checked in paragraph 15 of Standard Form 2-T to indicate that the Short Sale Addendum (Form 2A14-T) may be a part of the contract. In addition, a copy of the Short Sale Addendum signed by the Sellers was attached to the Contract. My buyer clients initialed the change in paragraph 15 but never signed the Short Sale Addendum. Absent their signatures on the Short Sale Addendum, is the Addendum part of the contract? Without my clients' signatures on the Addendum, do the Sellers have the right to terminate the contract until they receive a "Notice of Approval of Short Sale" from their lender?
ANSWER: Based on the facts you have described, we believe the Short Sale Addendum is part of the Contract and is legally binding, despite the fact that the Addendum was not signed by the Buyers. However, by failing to obtain the Buyers' signatures on the Addendum, the Sellers and their agent have allowed there to be some uncertainty. That is not what should have happened.
The Guidelines for completing Form 2-T (See Standard Form 2G) include instructions for adding an addendum to the contract. Paragraph 15 of Form 2G states that agents should check the box for any of the standard addenda that may be attached to the contract. The next sentence reads: "Any addenda referred to here should be properly identified, signed by the parties, and attached to each original of the contract."
Here, the lack of the Buyers' signatures on the addendum is only one factor a court would likely consider in deciding the parties' intentions. A court would also consider the fact that, by initialing the Sellers' change to paragraph 15, the Buyers signified their agreement to include the Short Sale Addendum as part of the Contract. Finally, a court would likely find it compelling that the Addendum was attached to the Contract when Sellers delivered the Contract to the Buyers. In our view, these facts provide sufficient evidence that the Buyers intended to be bound by the terms of the Short Sale Addendum. As a result, the likely result is that Sellers would be permitted to terminate the Contract pursuant to those terms.
To avoid any uncertainty, and the possibility of a later dispute, we strongly encourage agents to make sure that all addenda attached to a contract are signed by all parties.
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