What is the VA escape clause?
By Kyle Melvin · NMLS #1486450 · REV Mortgage ·
Short answer
It is a required provision in every VA purchase contract that lets the buyer cancel the deal and keep their earnest money if the VA appraisal comes in below the purchase price. It protects the buyer's deposit; it does not force the seller to lower the price, and it does not stop the buyer from choosing to pay the difference. Both parties sign it, and a lender cannot close a VA loan without it in the contract.
The clause is short. In substance: the purchaser shall not incur any penalty by forfeiture of earnest money or otherwise be obligated to complete the purchase if the contract price exceeds the reasonable value of the property established by VA. It has to be in the contract, signed by both parties, before a VA loan closes.
What it does: if the Notice of Value comes in under the contract price, you can cancel and get your earnest money back. Without the clause, an appraisal contingency is whatever the local contract form says, and in some markets that is nothing.
What it does not do:
- It does not require the seller to reduce the price. The seller can hold firm and let you walk.
- It does not prevent you from paying the difference between the appraised value and the price in cash if you want the house anyway.
- It does not end the conversation about value. The Tidewater process happens before the value is final, and a Reconsideration of Value can be requested after — both are covered on the appraisal page, and the escape clause page goes deeper on the clause itself.
For listing agents, the clause is the source of the "VA buyers can walk" objection, and the answer is that a well-priced house appraises. The seller objections answer covers the rest of that conversation.
Questions people also ask
- Can I still buy the house if it appraises low?
- Yes. The escape clause gives you the option to walk, not an obligation. You can negotiate a lower price, pay the difference in cash, or request a reconsideration of value.
- What if the seller refuses to sign the escape clause?
- Then the loan cannot close as a VA loan. The clause is mandatory under VA regulations, and the lender is required to have it in the file.
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