FHA contracts

The FHA Amendatory Clause, for Agents

Every agent who writes FHA offers meets the amendatory clause sooner or later, usually when an appraisal comes in low. It is required language that HUD dictates word for word, and it decides what happens to the earnest money. Here is what it does and when it applies.

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When it is required

If the buyer did not receive FHA's statement of appraised value before signing the sales contract, the contract must be amended before closing to include the amendatory clause, in HUD's exact wording. The actual sales price must be written into it, and any later price increase requires a revised clause.

What it says, in plain terms

The buyer is protected

The buyer is not obligated to complete the purchase, or to forfeit earnest money or any other penalty, unless the appraised value is at least the price stated in the clause.

The buyer can still proceed

The buyer has the option to go ahead regardless of the appraised value.

It is not a guarantee of value

The clause states that HUD does not warrant the value or condition of the property, and the buyer should be satisfied with both.

When it is not required

HUD lists the exceptions: HUD-owned property sales, 203(k) rehabilitation loans, sales where the seller is Fannie Mae, Freddie Mac, VA, USDA Rural Housing or another government agency, a lender selling foreclosed property, a foreclosure sale, and sales where the buyer will not be an owner-occupant.

Alongside the clause, HUD requires a real estate certification: the buyer, the seller and the agent or broker each certify, to the best of their knowledge, that the contract terms are true and that any other agreement between the parties is part of, or attached to, the sales agreement. A contract that already states it is the entire agreement can stand in for a separate certification. Either way, the agent is one of the certifying parties.

When an FHA appraisal comes in low, the clause frames the conversation: renegotiate the price, have the buyer bring the difference, or let the buyer exit with the deposit. For the other closing-week rule, see the 3-day Closing Disclosure rule.

Rule text: HUD Handbook 4000.1, Update 17 (11/26/2025), II.A.1 Origination/Processing: Amendatory Clause and Real Estate Certification. This is general information for agents, not legal advice.

Amendatory clause FAQ

What does the FHA amendatory clause do?

It says the buyer is not obligated to complete the purchase or forfeit earnest money unless the appraised value is at least the stated price, while letting the buyer proceed regardless of the appraisal if they choose.

When is the FHA amendatory clause required?

When the buyer has not received FHA's statement of appraised value before signing the sales contract. The contract must be amended before closing, and any later price increase requires a revised clause.

Is the amendatory clause required on a HUD home or a 203(k) loan?

No. HUD lists exceptions including HUD REO sales, 203(k) loans, sales by Fannie Mae, Freddie Mac, VA, USDA or other government agencies, lender REO sales, foreclosure sales, and non-owner-occupant purchases.