What is a short sale addendum?

If you’re experiencing financial difficulties, a short sale might be an appealing option.

But when going through this process, you must have all the correct documentation. In other words, you need a short sale addendum.

A short sale addendum ensures that all short sale details are included within the sales agreement. 

In this article, we’ll look at these addendums in more detail and examine what you should include. 

What is a short sale in real estate?

A short sale is when an individual sells their property for less than is owed on a mortgage.

This is usually an approach that impacts people who are experiencing financial difficulties.

Often, the alternative is having your home seized in foreclosure. 

For a short sale to occur, the mortgage lender must first approve it. Once a sale is made, all money goes straight to the lender.

They then have two choices. They can: 

  • Forgive the remaining balance. 
  • Invoke a deficiency judgment that forces the owner to pay some or all of the remaining difference.

Depending on your local laws, the lender may have to forgive the remaining amount. 

When and why do examples of short sales occur?

The most common reason for a short sale is that a homeowner is having financial difficulties. 

They are usually most likely to occur during times of economic unrest.

During these periods, house prices often go down, increasing the risk of a mortgage becoming greater than the price of a property. 

A short sale might be preferable to both the homeowner and the lender than a foreclosure.

This is because short-sale agreements may incur less severe financial penalties for both parties.  

From a buyer’s perspective, buying a short-sale property can be an attractive concept.

It’s an opportunity to buy a house at a reduced price. It also usually means purchasing property in a better condition than a distressed home. 

This option does, however, bring some additional risk.

Short sale purchases can also be more of a time-consuming process than buying a house normally.

What is a short sale purchase contract addendum?

A short sale purchase addendum is a document that goes alongside a sales contract. It’s an additional document to consider when writing your own real estate contract

The document is added once a sale has been approved and used at the transaction stage. 

It ensures that all details of the short sale are included within the sales agreement. 

What should a short sale addendum include?

Ultimately, a short sales addendum is a legal document. That means you need to ensure everything is correct. 

With that in mind, let’s explore how to write a contract addendum and look at some crucial things to include. 

All relevant documentation is collected 

Your addendum needs to contain several short-sale documents. These should include:

  • The written agreement of all relevant parties. 
  • A document that confirms that the property is being sold as a short sale. It must be clear that another party is also overseeing the transaction (the lender). 
  • A declaration that the addendum is only binding once the third party has accepted the terms of the agreement. This agreement should be presented to the buyer before the addendum can be invoked. 

Relevant names 

A reader should be able to identify relevant parties from your addendum easily.

Names should be presented in full, and additional contact information (phone numbers and mailing addresses) should be included.  

The date of the agreement 

Your short sale addendum and real estate purchase agreement are intrinsically linked. After all, the terms of your agreement will be applied to your short sale. 

For this reason, your addendum must reference the date of the sales agreement.

Ensure that the date is completely accurate to avoid running into problems later. 

The address of the property    

The full addresses of the short-sale property must be included within your addendum.

Again be careful not to miss out on any details.

Alongside your street name and number, be sure to include your State and Zip Code. 

As mentioned, the third party (the lender) must provide consent before the short sale can proceed.

This should include a declaration of how long a seller has to present consent. If consent isn’t presented during this time frame, the purchase agreement is considered void

The rights of the buyer

It should be made clear that a buyer can pull out of the offer made in the purchase agreement. 

The right to seek a better deal 

The short sale addendum to the purchase agreement should also clarify the seller’s right to find the best deal.

If they are approached with an offer of a higher price, they can accept it. 

Date of closure 

It’s crucial that the addendum clarifies the closing date of a transaction.

This usually aligns with the initial date agreed upon within the purchase agreement. 


If your agreement is to be binding, it must contain the signatures of all parties.

The signature section should also include space for a print name and the date of signing. 

What if I’m sending a document electronically? 

If you’re sending a document electronically, you can use eSignatures.

There’s no risk concerning legality, eSignatures in real estate are as legally binding as written signatures. 

Handle contracts and addendums with ease with PandaDoc

If you’re going through the process of short-selling a property, proper documentation is essential.

But compiling the correct documents isn’t easy. 

Creating any contract is a complex process, and short sale addendums are multilayered, adding extra complexity.

What’s more, any mistake can prevent your contract from being legally binding. 

PandaDoc is on hand to help. With a library of more than 750 contract templates to choose from, you can discover the perfect document template and customize it to suit your needs. 

Why not explore our real estate contract templates and find the right solution for you?