A buyer enters into a TREC contract with the Third Party Financing Addendum specifying a VA loan with 0% down payment. The addendum includes a provision that if the property does not appraise at the contract price, the buyer is not obligated to complete the purchase. This provision is known as the:
Correct Answer
C) VA escape clause (amendatory clause)
The VA loan requires an 'escape clause' (also called the amendatory clause) which provides that the buyer is not obligated to complete the purchase if the appraised value is less than the contract price. This is a VA requirement that protects the buyer from overpaying.
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Related Topics & Key Terms
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Related Concepts
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
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