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FHA/ VA Tip: The Amendatory Clause

Here’s a tip for real estate agents, when presenting an offer with FHA  or VA financing; include the FHA/VA Amendatory Clause to the Purchase Contract as part of the offer.   You’ll save you, the seller’s agent, the escrow company, the lender, and most importantly your buyer, a lot of last minute headaches.

You can download a copy of a templated form here.  Most lenders will accept this templated form.  If you don’t know the agency case number, etc, don’t worry about it.   The most important thing is to get the property address, the buyers’ and sellers’ names and the final contract price on the form.

Why the VA Amendatory Clause doesn’t need to be a “deal killer” for the appraisal contingency clause of a contract:

Contractually, the VA amendatory clause portends a 21-day appraisal contingency period for VA loans.  Pragmatically, the appraisers and underwriters complete their work prior to time limits making the 17-day appraisal contingency of the RPA feasible.  What that means to real estate agents is that it is conceivable that the appraisal contingency MAY have to be extended to 21 days if things go absolutely wrong but that the 17-day contingency period is reasonable for VA loans.

QUESTIONS AND ANSWERS:

From a Zillow Consumer:

Who must sign the Amendatory Clause? Two good answers were offered:

by Brenda Zabriskie:  Buyers, sellers, listing agent, and selling agent.  I usually scan it into my computer and send it off to the other Realtor who usually scans it again and sends it back to me.  I’ve never had a problem with having to have originals.  I guess it depends on which bank you are dealing with.

by Timothy Sutherland:  It depends also on the entity selling.  You don’t need it if it’s a bank owned property an FHA/VA/Fannie/Freddie sale.

From another Zillow consumer:

If I’m planning to use an FHA loan, can I order an appraisal in advance? Two good answers:

by Greg Darlin:  Yes, you can order an appraisal but you will be wasting your money.  If you order the appraisal on your own, it will be no good to anyone.  Why?  Because the lender can’t use it;  it  has to be ordered through the lender and/or their Appraisal  Management Company.  Even if they could use it,  the appraised value will differ.  Appraisals over 90 days old are rather worthless in this market because of the swings in value.

by Andrew Adams:  The answer is NO a borrower cannot order an appraisal and then use it for the loan.  When you buy a home (with an FHA or VA loan), both buyers and sellers are required to sign an amendatory clause.  This states that the property must  appraise for the purchase price.

Finally, an observation by Karen Thompson about why prompt execution of the FHA or VA Amendatory Clause is essential:

I was supposed to close on a deal tomorrow and now it is delayed because the FHA Amendatory Clause form was not fully executed by all parties PRIOR to closing.  The buyer’s lender says that this form has been around for a long time, but now with the new HUD guidelines, this form can no longer be completed at closing, but must be signed by all parties prior to closing.  Hence, to everyone’s frustration, closing cannot take place as scheduled.  My buyer’s lender complained that all lenders are not of the same understanding of the new HUD guidelines effective Feb. 1st.  Guess they didn’t receive proper training…….we’ve all been there ourselves before.

Read Doug Quance’s comments below for an example of a best practice for REALTORs when presenting contracts when the buyer uses a FHA or VA loan.

Good Luck.

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  • 11 comments

    11 Comments so far

    1. Don Reedy April 13th, 2010 4:44 pm

      Brian,

      Thanks for reinforcing. What we don’t provide up front gets lost, confused, or argued over later.

      Wisdom abounds with you, my man.

    2. Brian Brady April 13th, 2010 7:58 pm

      You know what prompted me to write this? My laziness, Don. I used to send these out with pre-approval letters but got out of the habit. Today, I just realized, for the 4th time this month, that I didn’t have one.

      Why? I didn’t do the work up front.

      After I found a blank form online, I thought it might be useful to have a permalink for it so I can refer to it in the future.

    3. Doug Quance April 14th, 2010 5:04 pm

      Just put one together in an offer, today.

      Made it part of the agreement… just like our Affiliated Business Arrangement Disclosure.

      You’ll like this part, Brian – our offer includes a loan COMMITMENT… and we intend to close at the end of the month, if accepted.

    4. RJ Baxter April 15th, 2010 4:46 am

      The funny thing is that the exact verbiage of the amendatory clause, to the letter, is in the standard Colorado sales contract, but lenders repeatedly still insist on the amend clause to be signed. Has anyone else encountered this?

    5. Brian Brady April 15th, 2010 10:40 am

      Wonderful work, Doug. Glad the form helped.

      RJ, I don’t make the rules. I just b—h about them

    6. Doug Quance April 16th, 2010 9:17 am

      I didn’t use your form, Brian – sorry for the confusion. I ask the lender to provide one for me to include with the offer. We’re going to have to get it filled out sooner or later – so I choose sooner.

      :)

    7. Deb Kruzel April 17th, 2010 8:44 pm

      Thanks for posting this! I often wondered why we didn’t have this form when we were doing the initial signatures and then forcing us to run around again for more signatures. Great time saver!

    8. Preston Guyton April 18th, 2010 12:26 am

      Hi Brian, Thank you so much for providing “FHA/VA Amendatory Clause to the Purchase Contract”. I am real estate agent and your suggestion is fantastic will help my current business for sure. Thanks once again for sharing this valuable tip!

    9. John Baker April 21st, 2010 11:29 am

      I’m concerned about the rumors I’m hearing that Marc Savitt, the hothead who runs something called the NAIHP, is going around the Capitol strong arming friends of real estate. How did his rally at the Capital go last week?
      I’m worried enough to start blogging about it. http://naihp.posterous.com

    10. John Baker April 21st, 2010 12:00 pm

      My last comment might qualify as flame comments, so I’ll rephrase just in case. Is the NAIHP a legitimate lobbying organization that represents real estate professionals? Do they have registered lobbyists? Thanks.

    11. Doug Quance April 21st, 2010 3:41 pm

      As an update – the offer has been countered and accepted; inspection has been completed; appraisal should be ready tomorrow; and we intend to close a day early on next Thursday.

      I love it when a plan comes together.