What is a FHA amendatory clause?

Home buyers signing the admendatory clauseThe buyer, seller, and real estate agents must all sign the Amendatory Clause/Real Estate Certification Form as part of the FHA mortgage requirements. The FHA amendatory form is incorporated into numerous sales contracts across the United States. If the buyer is receiving an FHA (or VA) loan, the parties must sign the amendatory form as an amendment to the sales contract if it is not included in the sales contract.

What is the FHA amendatory clause purpose?

If you read the amendatory clause slowly, it states that the home buyer cannot be compelled to purchase the home or condominium if the appraisal is less than the sales price.

Furthermore, if the appraisal is less than the sales price, the buyer is entitled to a refund of his or her deposit and will not be required to pay any penalties, even if a penalty was explicitly stated in the purchase and sales contract.

Who is required to sign the FHA amendatory clause?

As previously stated, the buyer, co-buyer (if applicable), seller, buyer's agent, and seller's agent must all sign the FHA amendatory clause before the lender can have the house apprised.

The buyer is not required to cancel the transaction

If the buyer so chooses, he or she can pay the difference between the appraised value and the sales contract price. The FHA's concern is that it will only provide a loan up to the value of the home. If the appraisal is less than the sales price, the buyer can pay the difference.

If the buyer wants to back out or is unable to make up the difference, the amendatory clause allows them to do so. The buyer, on the other hand, is not required to do so and can simply cancel the deal without incurring any financial penalties.

FHA amendatory clause and real estate certification

Frequently Asked Questions Regarding the FHA Amendatory Clause

Q. Can an FHA amendatory clause be signed at the closing?
A. Borrowers must sign the FHA amendatory provision prior to signing the purchase contract; otherwise, FHA will not guarantee the loan at closing.

Q. Can the FHA amendatory clause be signed electronically?
A. HUD/FHA will accept electronic signatures beginning January 30, 2014. On the Mortgagee Letter 2014-03, you can read the notice.

Q. Does the seller have to sign the fha amendatory clause?
A. Yes

Q. When an amendatory clause is not needed
A. According to the United States Department of Housing and Urban Development (HUD), some circumstances do not need an FHA amendatory clause to be signed.

Among them are the following:
  • HUD-owned real estate
  • Fannie Mae, Freddie Mac, the Department of Veterans Affairs (VA), Rural Housing Services, and other federal, state, and local government entities may sell the properties.
  • Foreclosures auctions
  • Transactions in which the borrower is not the owner-occupant

Q. Is the FHA amendatory clause required?
A. The FHA amendatory clause is required, unless the situation meets the above listed conditions.

Q. The seller won't sign the FHA amendatory clause.
A. There's no exception, other than those listed above.