The Addendum Concerning Right to Terminate Due to Lender's Appraisal (TREC No. 49-1) is dated 11-15-18 on the form itself; TREC's landing page lists an Effective Date of 03/01/2019. The form only applies under two conditions stated directly on its header: (1) the Third Party Financing Addendum is attached to the contract, and (2) the transaction does not involve FHA-insured or VA-guaranteed financing.
Why FHA and VA loans use a different mechanism
The form itself draws the line: "The financing described in the Third Party Financing Addendum attached to the contract for the sale of the above-referenced Property does not involve FHA or VA financing." FHA and VA transactions handle a low appraisal through Paragraph 4 of the Third Party Financing Addendum (TREC 40-11) instead of this form.
Check one box only
- (1) Waiver. Buyer waives the right to terminate under Paragraph 2B of the Third Party Financing Addendum if Property Approval isn't obtained because the appraisal's opinion of value doesn't satisfy the lender's underwriting requirements. If the lender reduces the loan amount because of the appraisal, the cash portion of the Sales Price increases by the amount the loan was reduced.
- (2) Partial Waiver. Same waiver, but conditioned on two things both being true: Property Approval fails because of the appraised opinion of value, AND that opinion of value is at or above a dollar figure the parties write into the form. Below that number, the buyer keeps the Paragraph 2B termination right. The same cash-portion-increase mechanic applies if the waiver is triggered.
- (3) Additional Right to Terminate. This one runs the opposite direction — it adds a right rather than waiving one. In addition to Paragraph 2B rights, the buyer may terminate within a negotiated number of days after the Effective Date if (i) the appraised value, according to the appraisal obtained by Buyer's lender, is less than a dollar figure written into the form, and (ii) the buyer delivers a copy of the appraisal to the seller. If the buyer terminates under this box, earnest money is refunded.
How this connects to the Notice of Buyer's Termination (TREC 38-8)
TREC 38-8 lists "termination under Paragraph (3) of the Addendum Concerning Right to Terminate Due to Lender's Appraisal" as one of its eight grounds for a buyer to terminate — and it requires the buyer to have already delivered a copy of the appraisal to the seller. That requirement traces directly back to condition (ii) in this addendum's Paragraph (3): the appraisal copy has to go to the seller as part of the termination, not sometime after.
What this doesn't cover
Nothing on this form addresses what happens if the buyer doesn't attach it at all. Without this addendum, a low appraisal that also causes Property Approval to fail under the Third Party Financing Addendum still falls back to Paragraph 2B's standard termination mechanics — the 3rd-day-before-Closing deadline and the notice-plus-lender-statement requirement.