Amendatory Clause in Florida FHA Transactions
The amendatory clause is a HUD-required provision in FHA purchase contracts that protects buyers from being obligated to purchase a property for more than its FHA-appraised value. This clause is mandatory in every FHA-financed transaction in Florida.
How It Works
When a Florida buyer applies for an FHA mortgage, HUD requires the property to be appraised by an FHA-approved appraiser. If the appraised value is lower than the contract price, the amendatory clause allows the buyer to withdraw from the contract without penalty and receive a full refund of the earnest money deposit. The buyer cannot waive this right; the clause is mandatory regardless of the parties' preferences.
Practical Impact
In competitive Florida markets, the amendatory clause can create complications for sellers because FHA appraisals may not keep pace with rapidly rising prices. Some sellers prefer buyers with conventional financing to avoid the appraisal ceiling. Florida real estate agents advising FHA buyers should prepare them for the possibility of renegotiation and counsel sellers on the clause's implications before accepting FHA offers.
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Barnes Walker Real Estate
Barnes Walker handles FHA and conventional real estate transactions throughout Southwest Florida. Contact our real estate team for transaction guidance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC