By March 25, 2020April 3rd, 2024No Comments

Dear Friends:

I know there is a lot of discussion regarding the use of a COVID-19 pandemic addendum, particularly the Texas Realtors’ COVID-19 Addendum. I have seen several addendums floating around and the Texas Realtors Addendum is by far the best. However, it is important to remember that it is form and it may or may not be a good fit for your clients’ situation as “one size does not fit all.”

First, there is no visibility on the impact of the pandemic other than what is happening right now. Given that most transactions close within 30-45 days it is difficult to predict the needs of your clients with a form when the situation it attempts to fix is changing on a daily basis.

Second, the Texas Realtors’ COVID-19 Addendum includes vague language. It allows the buyer to unilaterally extend the closing date for an additional 30 days and allows either party to terminate the contract “[i]f any portion of the closing is still not able to be performed upon the expiration of the extension…” The addendum also permits the buyer to unilaterally terminate the contract, with the earnest money refunded to the buyer, if the buyer is unable to fund their loan and close due to the buyer’s “…loss of income from COVID-19 related issues.”

For a seller the loss of income language is problematic because who is not going to suffer the loss of income from COVID-19 implications? Effectively, the addendum as worded allows buyers to manipulate the process if they decide they simply no longer want the property, even if they have had the property under contract for 60+ days.

As a buyer the Texas Realtors’ COVID-19 Addendum is a great tool. As a seller the addendum makes less sense unless the market becomes soft and the seller is willing to allow the property to be tied up for 60+ days and then still risk the loss of the sale and the earnest money.

My advice for agents is that whenever possible, rather than use a COVID-19 pandemic form, consider using the promulgated forms e.g. Third-Party Financing Addendum and Amendment to Contract to help solve some of the issues with the pandemic. For example, use the Third-Party Financing Addendum with a generous time period to obtain financing given that approval may be delayed by the pandemic and use a conservative interest rate to avoid any rate float caused by a delayed approval. This way the buyer retains some control over the transaction given that lending approvals may be slower than normal during the pandemic and the seller some control over the time the property is under contract and over the buyer’s right to terminate. As the situation dictates, use the Amendment to Contract to extend the closing date if the title company or lender has delayed the transaction. This way you are using the promulgated forms based upon the circumstances at the specific time they are needed rather than with an addendum at the beginning of the transaction that attempts to foretell the future.

If you have any questions, please feel free to contact me or one of ABDM’s attorneys.

A. Boone Almanza

Almanza, Blackburn, Dickie & Mitchell LLP

(512) 628-9224 direct

[email protected]