Understanding Purchase Agreement Amendments: A Detailed Overview

What is a Purchase Agreement Amendment?

An amendment to a purchase agreement is simply a change to the original agreement. An amendment to a purchase agreement can be for any reason either party believes is justified. For example, on an offer to purchase, the buyer can change the amount of time for financing or for inspections. On the flip side, the seller may have learned certain information about the buyer’s ability to qualify for financing and can request additional information before proceeding with the sale.
There are any number of reasons that a buyer or seller could request an amendment. Let’s say the buyer changes his or her mind about the house and wants the negotiations reopened. Or the buyer may request an extension of the time the agreement is in effect if inspections have not yet been completed.
Either side may request an amendment , but it always requires the acceptance of both parties for it to be valid. If either party is adamant that the amendment is not acceptable, then the real estate transaction will likely not continue without significant changes to the original agreement.
If the buyer and seller do agree to the terms of the amendment, either party can sign a copy of the amendment. The other party simply needs to accept the amendment by signing it the same way the original offer to purchase agreement was signed.

Common Reasons to Amend a Purchase Agreement

Amendments to purchase agreements are quite common in real estate purchases. In some instances, a seller or buyer will need to extend the time to inspect a property, extend the financing or other closing deadline, or to correct typographical errors or omissions in the contract. In other cases, material facts may have come to light which are affecting the sale of the property.
Some of the most common reasons for amending a purchase agreement include:

(1) Changes to the timing of the completion of contingencies (e.g., inspection, financing, closing).
(2) The seller needs more time to close on the property, or to provide access to the buyer.
(3) Discovery of a material fact about the property affecting its value (e.g., floor space measurement, significant difference in rental income, a latent defect in the property).
(4) Changes to the price or other important financial terms of the purchase agreement.
(5) Typographical errors or omissions in the purchase agreement that need to be corrected in order to clarify the intent of the parties.
(6) Cancellation of the purchase agreement.

How to Amend a Purchase Agreement?

Amending a purchase agreement involves several key processes, from negotiation to the drafting of the amendment and the execution of the document. The process is similar to the original purchase agreement process, and as such, both the buyer and seller should enlist the help of an attorney.
Negotiations often begin with an email or letter to the other party requesting a revision to the existing contract. A sample outline of an email is provided below for guidance.
Dear [Client’s Name],
As you know, the current lease allows us to end the sale if there are any issues that arise during the inspections. As a means of getting the deal completed and to save costs on future inspections and delays in closing, I would like to submit the following amendment to the purchase agreement. Please review the attached amendment. Let me know if you have any questions. Thanks, [Sign your name below this line.] [Do not sign this part.]
AMENDMENT TO PURCHASE AGREEMENT This Amendment is made this __ day of _____, 20__. The undersigned parties hereby amend the Agreement (dated month, year) between Buyer__(insert Buyer’s name)__ ("Buyer") and Seller ____ (insert Seller’s name) ____ ("Seller"), concerning the real property described as _____(the "Property"). The Agreement is hereby amended as follows: Add sections as necessary to amend the purchase agreement, such as: [Note: Be sure to include the signed signatures the buyer(s) and seller(s]-"This Agreement is hereby amended as follows:"

Legal Issues Relating to Amendments

As outlined in the preceding sections, a signed purchase agreement can provide a handshake deal very significant enforceable rights. Such agreements are referred to as binding. Binding purchase agreements are enforceable if they meet certain legal requirements which include having been signed by both parties and containing all material terms of the deal. A closing or settlement statement is also considered binding.
Contracts like purchase agreements are governed by contract law. That means that each jurisdiction has laws which require certain terms to be contained in contracts to make them enforceable by the courts. Generally such terms might include, a description of the property, price, how purchase price is to be paid, type of title to be conveyed, type of deed, who pays for vices and abstracts, and a closing date.
State laws further govern how amendments to these contracts are to be made. Some require written agreements to be signed by both parties. Others may even require notary acknowledgments or witnesses. Some do not require anything at all. Regardless, it is always preferable to have the amendment signed and/or acknowledged.
In Texas many amendments to purchase agreements must be signed. No specific transaction or amendment requirement is discussed in the statutes. However, case law in Texas requires that certain amendments be executed and acknowledge. These include earnest money contract amendments, release of escrow, exchange agreement amendments, sale of land contracts, rescission contracts, and limited liability company agreements.

Typical Clauses Found in an Amendment Agreement

Amendment agreements typically contain similar provisions to purchase agreements but with added provisions that set forth the amended terms and that the amendments will control. Common clauses in amendment agreements include provisions that discuss the scope of the amendment (including those items not amended), the effective date of the amendments, and the signatories to the amendment agreement. Below are some common clauses:
This Agreement is being executed in conjunction with the Purchase and Sale Agreement dated _____, 20__ between Purchasers and Seller for the Property referred to herein and the _____ Addendum dated _____, 20__ to the Purchase and Sale Agreement between Purchasers and Seller . The terms, covenants and conditions set forth within the Purchase and Sale Agreement are hereby incorporated herein by reference. In the event of a conflict between this Agreement and the Purchase and Sale Agreement, the terms hereof shall control.
Pursuant to that certain Purchase and Sale Agreement dated, _____, 20__ by and between Purchasers and Seller, as amended by Addendum No. _____ ("Amendment"), the parties hereto agree that any reference in this Agreement to the Purchase and Sale Agreement shall be deemed to refer to the Amendment.
The provisions of this Agreement or the Annuity hereunder shall control and supercede any contrary provision of the Purchase Agreement.
As used herein, the "Effective Date" shall mean the date executed by the last party hereto.

How Do Amendments Effect Contract Enforceability?

Amendments to a purchase agreement do not change the fact that the agreement as amended is a contract between the two parties to the extent that it was valid and enforceable before the amendment, but the amendment could affect the enforceability or execution of the contract in different ways. For example, even though the amendment is omitted from the original agreement, and disregarded as written and recorded in order to focus on the enforceability of only the original agreement, the amendment could be relied on by one party as an independent basis for breach. Put differently, the amendment stands as a separate contract independent of the original agreement, and even though the amendment may not otherwise be enforceable on an alone basis, it could be used as an affirmative defense to a breach of the original agreement and as an additional basis for a breach of contract action in and of itself. In addition, the amendment may limit or eliminate the requirements, or some of the requirements, in the original agreement or change the measurement of the performance of the requirements. Each of these scenarios is a basis for an affirmative defense or for an affirmative cause of action for specific performance. Further, the amendment may affect the original agreement because it may appear on its face to be such an integral part of the agreement that the removal of it creates or establishes a basis for a claim of a duty of good faith and fair dealing notwithstanding that there should not have been any request by the other party to the original agreement for such an amendment. Even if the amendment is properly dismissed from the original agreement and stricken from the record, the existence of it and the language in the amendment on its face may still be sufficient to establish a defense or a claim. As discussed hereinbelow, the best way to address the concerns described above is through sufficiently clear and pointed language.

Tips for Drafting Good Amendments

When amending a purchase agreement, you should (but might not have thought of) identify who has the authority to sign the amendment and ensure that any necessary signatories do in fact sign. The parties should also consider whether a full written agreement is necessary or appropriate in lieu of an email exchange (with or without an attached, signed writing). For example, if the parties are extending the closing date, you might simply be able to confirm the extension through an email from the Buyer’s attorney to the Seller’s attorney, but it is a good idea to confirm the new closing date by the latest on the day of closing .
You should also avoid listing matters that are being amended and then just saying all of the other provisions of the agreement are restated and carried forward. This type of extensive "cut and paste" is frequently misinterpreted and can have unintended results.
Another practical tip is to have the parties initial and date each page of the purchase agreement and the amendment to avoid disputes over what the parties agreed to, as well as any contention as to the date of the agreement.