Contracts
What is an 'amendatory clause' required by FHA in Illinois sales contracts?
AA clause allowing the FHA to amend loan terms after closing
BA clause stating the buyer is not obligated to complete the purchase if the appraised value is less than the purchase price, protecting FHA borrowers✓ Correct
CA clause allowing the seller to amend the price if the appraisal is low
DA clause required by Illinois law in all government-backed loans
Explanation
FHA requires an amendatory clause (or escape clause) in purchase contracts stating that the buyer is not obligated to complete the purchase if the property's appraised value is less than the purchase price. This protects the FHA buyer from overpaying for a property.
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Key Terms to Know
Earnest Money
A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Math Concepts
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