Updated on April 25th, 2023
An FHA/VA financing addendum is attached to a purchase contract to state that a buyer with FHA/VA financing can back out of the sale if the appraised property value is less than the asking price. The document’s language protects the buyer by ensuring they keep their earnest money deposit in case they choose not to follow through on the sale due to a low appraisal. The addendum also requires the seller to carry out all appraisal-required repairs up to a predetermined amount.
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FHA/VA FINANCING ADDENDUM
1. THE PARTIES. This FHA/VA Financing Addendum (“Addendum”) made this [MM/DD/YYYY] (“Effective Date”) is by and between:
Seller: [SELLER’S NAME] (“Seller”) and
Buyer: [BUYER’S NAME] (“Buyer”).
The Seller and Buyer are each referred to herein as a “Party” and, collectively, as the “Parties.”
2. ORIGINAL AGREEMENT. This Addendum is being added to the purchase agreement between the Parties, dated [MM/DD/YYYY], for the property located at [PROPERTY ADDRESS] (“Original Agreement”).
3. FINANCING. The Buyer is applying for a: (check one)
☐ – FHA Loan
☐ – VA Loan
4. FHA FINANCING AMENDATORY CLAUSE. It is expressly agreed that, notwithstanding any other provisions of this contract, the Buyerp shall not be obligated to complete the purchase of the property or to incur any penalty for forfeiture of earnest money deposits or otherwise unless the Buyer has been given in accordance with HUD/FHA or DVA requirements a written statement issued by the Federal Housing Commissioner, the Department of Veterans Affairs or a Direct Endorsement lender, setting forth the appraised value of the property of not less than $[APPRAISAL MINIMUM]. The Buyer shall, however, have the privilege and option of proceeding with the 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 nor the condition of the property. The Buyer should satisfy himself/herself that the price and condition of the property are acceptable.
5. VA NOTICE TO BUYER. It is expressly agreed that, notwithstanding any other provisions of this contract, the Buyer shall not incur any penalty by forfeiture of earnest money deposits or otherwise be obligated to complete the purchase of the property described herein, if the contract purchase price or cost exceeds the reasonable value of the property established by the Department of Veterans Affairs. The Buyer shall, however, have the privilege and option of proceeding with the consummation of this contract without regard to the amount of the reasonable value established by DVA. If Buyer elects to complete the purchase at an amount in excess of the reasonable value established by DVA, Buyer shall pay such excess amount in cash from a source which Buyer agrees to disclose to the DVA and which Buyer represents will not be from borrowed funds except as approved by DVA. If DVA reasonable value of the property is less than the sales price, Seller shall have the option of reducing the sales price to an amount equal to the DVA reasonable value and the parties to the sale may close at such lower sales price with appropriate adjustments to the sales contract.
6. EXECUTION. This Addendum may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
7. CERTIFICATION. The Seller, the Buyer, and the broker hereby certify that the terms of the sales contract are true to the best of their knowledge and belief and it is agreed that any other agreement entered into by any of the parties is fully disclosed and attached to the sales contract.
Seller Signature: ___________________________ Date: [MM/DD/YYYY]
Print Name: [SELLER NAME]
Listing Agent Signature: ___________________________ Date: [MM/DD/YYYY]
Print Name: [LISTING AGENT NAME]
Buyer Signature: ___________________________ Date: [MM/DD/YYYY]
Print Name: [BUYER NAME]
Selling Agent Signature: ___________________________ Date: [MM/DD/YYYY]
Print Name: [SELLING AGENT NAME]