FHA Amendatory Clause and Real Estate Certification

FHA required appraisal clause

Home buyer signing the FHA amendatory clauseThe Federal Housing Administration (FHA) Amendatory Clause is an important document that must be included in almost all FHA home loan transactions. This clause gives buyers the right to back out of a sale if the appraised value of the home is lower than the negotiated price.

What is the FHA Amendatory Clause?

For every prospective home buyer who is thinking about applying for a Federal Housing Administration (FHA) loan, the FHA Amendatory Clause is an important document.

This language, which must be included in all contracts between buyers and sellers when acquiring a house with an FHA loan. The amendatory clause was created by the FHA to safeguard borrowers.

According to the amendment, the buyer has three alternatives if the property's appraised value is less than the purchase price:

  1. they may either renegotiate with the seller,
  2. cancel the sale without losing their earnest money deposit, or
  3. agree to move forward and pay the difference between the appraised value and the sales price.

This amendment has played an important role in ensuring that purchasers are safeguarded during real estate transactions ever since it was introduced.

Without this safety net, purchasers may find themselves in challenging circumstances where they could not get financing because of lower appraisals, but were still required by the contract to complete their acquisition.

Requirements for Using the FHA Amendatory Clause

Buyer and seller shaking handsThe amendatory clause becomes a it becomes legally binding agreement after the home buyer, seller, and any participating real estate agents sign the document. The clause must be signed and dated by the buyers, sellers, and their real estate agents.

Conventional loans offered by Fannie Mae and Freddie Mac and mortgages guaranteed by the U.S. Department of Agriculture are exempt from the amendatory provision (USDA).

Real Estate Certification

A document called the FHA Real Estate Certification has to be filled out by the seller of a house being purchased with an FHA loan. This document is used to affirm that the property meets the Federal Housing Administration's minimal health and safety criteria (FHA).

The seller must sign the document and state to their knowledge of these requirements and that the property complies with them. By confirming that the home being purchased is secure and suitable for habitation, the FHA Real Estate Certification is an important document that helps in protecting the borrower.


Understanding the requirements of the FHA amendatory clause is vital to ensuring a smooth and successful home buying transaction. This clause protects buyers from a low appraisal and enables them to make informed buying decisions.

Buyers must also be informed of any changes to this clause, such changes may vary from one jurisdiction to another. Buyers should get in touch with their real estate agent or lender if they have any questions concerning the FHA amendatory clause.


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