What should a broker do with a non-standard contract addendum?

QUESTION: My client made an offer on a property that is listed by a large company that buys homes from individuals and then immediately turns around and resells them. A representative of the large company countered my buyer’s offer, and the counteroffer included a non-standard addendum that appears to change many of the terms of the Standard Form 2-T (Offer to Purchase and Contract). The changes include per day late fees for failing to close on the settlement date, a limit on the time in which a party must respond to repair requests, an agreement to use a closing attorney selected by the seller, and a provision granting the seller the right to cancel if the property is subject to a “prior contract.”

My buyer is asking me whether they should sign the addendum and accept the counteroffer. What should I tell them?

ANSWER: The non-standard addendum you have described would significantly and materially alter certain terms of Form 2-T. As such, if your client has questions about the non-standard addendum and about how it might affect the terms of Form 2-T, you must tell them that they need to obtain the advice of legal counsel. The non-standard addenda we have seen range widely in how well they are drafted. Many do not articulate how to resolve conflicts between their terms and the terms of Form 2-T, which can create ambiguity in the contract.

The non-standard addendum you have described should be treated like other non-standard contracts or forms you’ve seen, such as new builder contracts and REO sales contracts. Be sure to advise your client to seek legal advice and confirm your recommendation in writing. An email will suffice. Be sure to keep a record of your writing in the client’s file should questions later arise.

Release Date: 8/23/2018