What Is Amendatory Clause?
Amendatory Clause: An FHA and VA contract term letting the buyer cancel if the appraisal is below the price.
Also called: escape clause
The amendatory clause, sometimes called the escape clause, is required in FHA and VA purchase contracts. It says the buyer isn't obligated to complete the purchase or lose earnest money if the appraised value is less than the price.
How it works
If the appraisal comes in low, you can:
- Proceed at the original price, paying the difference in cash
- Renegotiate the price
- Cancel and get your earnest money back
Signing it
It's signed by the buyer and seller, often as an addendum, and is required before closing.
Good to know
Because of the amendatory clause, an FHA or VA buyer can't fully waive appraisal protection. Sellers in competitive markets sometimes see that as a disadvantage, but it protects you.