Seller is stating that they are now, 8 years after original real estate contract was signed, adding an "addendum" to a contract due to late payments. Contract is held by an escrow company.

Can they do this or does it need to be an amendment? What happens if buyers don't agree to these changes?

Please note: no where in our original contract did they stipulate a grace period, or penalties if late.

An addendum and an amendment are basically the same thing. Both have to be signed by both parties in order to be valid.

It sounds like this is a contract for deed situation. If the original contract did not have any stipulations for grace periods or late penalties then technically the buyer is in default of the contract whenever a payment is late. The seller would have the right to declare the contract terminated if the buyer made a late payment. So if you are the buyer it might be a good idea to reach some kind of agreement with the seller for an addendum for late payments to avoid losing the contract altogether.

Remember, the new late penalties can be completely avoided if the payments are made on time.