What does an “Amendatory Clause” mean in reference to a short sale?

House for sale in Arizona under short sale

Asked on May 16, 2009 under Real Estate Law, Arizona

Answers:

MD, Member, California Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

This is the clause that says your home has to appraise for at least the sales price or the buyer can walk away.  I am not surprised with a short sale.

Does the following look familiar?

 

 

 

 

 

AMENDATORY CLAUSE:

 

 

“An amendatory clause must be included in the sales contract when the borrowerhas not been informed of the appraised value… The amendatory clause must contain the following language:”

“It is expressly agreed that notwithstanding any other provisions of this contract, the purchaser shall not be obligated to complete the purchase of the property described herein or to incur any penalty by forfeiture of earnest money deposits or otherwise unless the purchaser has been given in accordance with HUD/FHA or VA requirements a written statement by the Federal Housing Commissioner, Department of Veterans Affairs, or a Direct Endorsement lender setting forth the appraised value of the property of not less than $_________________ [insert the sales price as stated in the contract]. The purchaser shall have the privilege and option of proceeding with consummation of the contract without regard to the amount of the appraised valuation. The appraised valuation is arrived at to determine the maximum mortgage the Department of Housing and Urban Development will insure. HUD does not warrant the value or the condition of the property. The purchaser should satisfy himself/herself that the price and condition of the property are acceptable.”  (HUD Handbook 4155.1 Chapter 3-4)


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