In real estate transactions, an F.H.A. Escape Clause is a provision in a purchase agreement that protects a buyer using FHA financing if the property does not appraise for at least the agreed upon purchase price. The clause allows the buyer to cancel the contract without penalty if the appraised value is lower than the sales price.
Under this clause, the borrower is not obligated to complete the purchase and is entitled to a return of any deposit made. The FHA escape clause is intended to prevent buyers from overpaying for a property and ensures that FHA insured loans are based on the property’s appraised value rather than solely on the contract price.
