Should You Add a COVID-19 Clause to a Real Estate Contract?

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Should You Add a COVID-19 Clause to a Real Estate Contract? Learn More: https://www.hauseit.com/covid-19-coronavirus-real-estate-purchase-contract-addendum/

The residential real-estate industry nationwide experienced considerable amounts of disruption and uncertainty stepping from the Covid-19 pandemic. Even as the pandemic subsides, buyers and sellers face new coronavirus and future pandemic related legal risks and operational difficulties during the course of a real estate transaction. Now, a real estate transaction requires complex coordination between numerous parties these include brokers, attorneys, buyer seller, appraisers lenders, title companies and inspectors. As a result, it's increasingly likely that one or more service providers or parties to the deal may be unavailable due to COVID-19 or any future pandemic.

Real estate deals are therefore subject to delays and in some cases deals simply cannot move forward because of limited availability of third parties, illness or general uncertainty. Real estate attorneys nationwide have begun to include a COVID-19 addendum clause, also known as a writer to new purchase contracts being signed. The optional coronavirus contract addendum provides additional timing flexibility and deal cancellation optionality for both the buyer and seller in response to the uncertainty and increased risk brought about by the pandemic. The rider allows for the buyer to recoup her or his deposit should a real estate transaction be cancelled through language in the Covid-19 contract rider.

What does the Coronavirus purchase contract rider say? The coronavirus purchase contract addendum is designed to protect against COVID-19 related disruptions which may delay a deal. For example, a transaction might not be able to move forward if government-mandated stay at home orders prevent an appraiser or inspector from visiting a property. Another example would be if the buyer or seller gets sick and is hospitalized or quarantined making it impossible to move forward with the deal based on the original timeline as outlined in the purchase contract. Some condo and co-op buildings have also banned move in move outs and other resale related activity during the pandemic and the inability for the seller to move out or the buyer to move in or both creates another obstacle when it comes to finalizing and moving forward with a closing date.

The boiler plate COVID-19 addendum provided by the New York Association of Realtors provides for an optional extension of all deadlines in a purchase contract due to COVID-19 issues. The contract writer also allows for optional termination of the contract by either party should the COVID-19 issue extend for a mutually agreed-upon number of days beyond the closing date set forth in the original contract. For buyers who are financing with a mortgage contingency, the coronavirus contract rider also includes a funding contingency.

Now, this gives a purchaser the ability to cancel the deal and recoup the contract deposit if the buyer is unable to fund the loan at closing due to COVID-19. This protects the buyer who loses her or his job due to coronavirus after receiving a loan commitment letter but before closing as banks will not fund the loan to a purchaser who is no longer employed. For the purposes of the optional contract rider, COVID-19 issues may include but are not limited to emergencies declared by the government, travel restrictions, mandatory closures or staff reductions, quarantine exposure to or contraction of COVID-19.

Is a coronavirus purchase contract addendum required? No, the COVID-19 purchase contract addendum is completely optional. The stock rider itself may be utilized and optionally customized based on mutual agreement of both buyer and seller. Now, the rider can be included as part of the contract itself or it may be utilized after the contract has already been signed provided that both parties agree to it.

So, there you have it, we hope you found this video helpful. I'm Nick at Hauseit, visit our website https://www.hauseit.com to learn about ways to save money and reduce your closing cost when buying or selling real estate here in New York City. And if you liked this video, do us a favor hit like, subscribe, leave us a comment. We greatly appreciate it and we hope to see you on the next video!

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