Legal Question in Real Estate Law in Illinois
Can I recover the expenses paid after the Seller canceled the real estate contract on us? My fianc� and I have entered into a contract to buy a foreclosed townhouse. We got everything approved and ready to go, had already a closing date, but the Seller notified us a day before the closing date that they are having some issues with the back taxes on the property. Long story short, they cancelled the contract. Now, we want to recover our earnest money that we deposited with the Seller�s Agent ($2,000) and want to know if we can get our money back we paid to appraise the property ($585.00) since it wasn�t our fault that they backed out of the contract. Also, we signed the HomeSteps Addendum #1 to Contract of Sale . Section 19 of it says that �in the event the Seller fails or refuses to proceed to settlement in violation of the contract, Purchaser�s sole and exclusive remedy shall be the recovery of liquidated damages in the amount of $1,000. Seller shall promptly tender said sum upon demand from Purchaser.� My question is, are we entitled to get this money? Thank you!
2 Answers from Attorneys
The earnest money should not be an issue at all. In order to determine if you are entitled to compensation, the doscuments would need to be reviewed.
Your contract clearly has a default and termination clause. From what you say, if the Seller defaults your remedy is solely a return of your earnest money plus $1,000.00 in liquidated damages. If that is true, then that's what you get. You should have an attorney review the contract to verify that this is the case. The contract may also say, for example, that you may also have the right of "specific performance" which means you would have the right to sue to close, but then you could lose your loan commitment, which would be a problem. Again, an attorney can help determine whether you have any other rights under the contract.
As a side note, I am aware of a similar situation where the seller had failed to pay several years of back taxes, over $10,000.00, and it was a short sale where the lender insisted on a no-less-than amount at closing even if it was less than the loan, in order to close things out. In that case, the buyer had to come up with $10,000.00 more at closing to cover the taxes because the contract did not protect against that problem. It's all about the contract.
In rare instances a court may find that if a breach of contract amounts to a "tort" then additional damages may be assessed, but that is a stretch and requires your having to sue, which would be extremely costly. Again, take your contract to an attorney to review. QUICKLY!!!!!!!!!! It may be too late....because protecting your rights may require reccording the contract to put a monkey wrench on title!!!!
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