A document adding new terms to an existing contract without changing its original provisions.
Why Addendum matters on the exam
This term belongs to Contracts. The questions below are real items from Freehold's bank that use it - each one cites its source.
Exam questions using Addendum
Every Freehold question shows why the right answer is right — and cites its source.
Many standard purchase contracts include a clause prohibiting assignment without the seller's prior written consent. The purpose of such a clause is primarily to:
Prevent the buyer from ever closing on the property whatsoever
Automatically void the whole contract whenever any further addendum is added later by the parties
Give the seller control over who may ultimately step into the buyer's contractual position
Require the buyer to pay a higher final purchase price
Show answer & explanation
Give the seller control over who may ultimately step into the buyer's contractual position — An anti-assignment clause lets the seller retain approval rights over any substitute purchaser, since the seller may have concerns about a new party's ability or willingness to complete the transaction.
Source: PSI National Real Estate Exam Content Outline §7 Contracts
For an addendum to become a binding part of a real estate purchase contract, it must generally be:
Signed by all parties to the original contract
Filed with the local recorder's office
Approved by the buyer's lender only
Verbally agreed to by the parties' agents
Show answer & explanation
Signed by all parties to the original contract — An addendum only becomes an enforceable part of the contract once it is signed by all parties bound by the original agreement, just like any other contract modification.
Source: PSI National Real Estate Exam Content Outline §7 Contracts
The key distinction between an addendum and an amendment to a purchase contract is that:
An amendment may generally just be made verbally, but an addendum must always be reduced to writing first
An addendum typically adds new terms, while an amendment typically changes or replaces existing terms
Only a supervising broker, and never a salesperson, may lawfully create an addendum, regardless of that salesperson's years of experience
An amendment generally terminates the underlying contract once the parties sign it
Show answer & explanation
An addendum typically adds new terms, while an amendment typically changes or replaces existing terms — An addendum generally supplements the original agreement with additional provisions, while an amendment modifies or replaces specific terms already contained in the existing signed contract.
Source: PSI National Real Estate Exam Content Outline §7 Contracts
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