Closing was cancelled due to the seller fault…how to get my invested money back?

I am a beginner investor so I do not fully understand all the liabilities with RE transactions and I will appreciate any advice or suggestion on my problem.
I made an offer for a house and the offer was accepted. The purchase agreement was signed by me(buyer) and the seller and everything looked good. So I started the process of mortgage origination with my mortgage broker. I ordered inspection for the house and the house didn’t have any utilities turned on because the seller couldn’t afford it so I turned utilities on and payed for inspection. And then I order appraisal on the house so during the period of time when the house was “pending sale” I invested around $1500 dollars. Few days before the closing my title agent told that house started foreclosed process because the seller didn’t pay mortgage for a few month. And then she (my title agent) started to negotiate the deal with the foreclosing atterney and closing was rescheduled a few times. So at the end bank (that has a lien on the house) needed another 1-2 month to verify the seller personal information (bank statements, w2 and etc) before they decide if they agree to sell the property(the seller had overall debt on the house around $4000 – including mortgage payments and taxes). I decided to cancel this deal because it has been over 3 month going back and forth with the house and I cannot pay utilities for the house that is not mine. Anybody can advice: can I start any legal action to get my invested money back? Any ideas?


the questions are:

  1. what did the contract say regarding timing of closing?
    1a. what did the contract say regarding these expenses if the deal doesn’t go through?
  2. did seller actually breach any provisions of the contract?
  3. did you waive any rights by breaching the contract and withdrawing purchase offer?

whatever was written in the contract is what the parties should do.

You turned on the utilities at your expense. You could have turned off the utilities as soon as the inspection was done. That might have saved you a few dollars.

You cancelled the deal, not the seller. Money you spent out of pocket for your appraisal and credit report was required by your lender. You won’t be able to recover that money. Money you spent for a home inspection was also spent out of pocket. I am sure your contract says that a home inspection is done at your expense. You buy a home inspection to insure that the property does not have any big, expensive hidden defects. Think of the home inspection as insurance – money well spent now to save huge expenses later.

The only money we have not talked about is whatever you may have put down as an earnest money deposit. Again, because you cancelled the deal, you also walked away from your earnest money deposit.

You had $1500 already “invested” in the deal. If you had already turned off the utilities, it would not have cost you any more money to stay in the deal until it settled. I am guessing that the agent was attempting to negotiate the final payoff of all the liens, arrearages, and the mortgage for the amount you had offered as a short sale.

If the amount owed was more than what you were offering to pay, then the lender’s approval is needed because you are asking them to accept less than they are owed to release the lien on the property. This situation is called a short sale, and it is not uncommon for a short sale to take a couple of months.

It appears that you just let your inexperience and frustration with the “short sale” process get the better of you. Unless you can talk with your agent and salvage this deal, you are out of pocket for whatever you spent. Make another offer, if you have to and use the same lender for your mortgage loan. The appraisal and inspection report are still valid and won’t have to be repeated.

If you can’t or don’t want to get back in this deal, you have no legal recourse, in my opinion. Just consider the $1500 you spent as your tuition to the school of hard knocks.

Closing was rescheduled to be on 1/31/2007 but since title had liens and the seller couldn’t pay all these liens the closing couldn’t happen. One of the clauses in my contact says that if title cannot be delivered free of liens “the buyer can terminate the agreement and the seller has to reimburse the costs incurred by the buyer”. Contract clearly says that I can be reimbursed for the fees associated with the purchase. They also have to return my deposit which is $1000. So any ideas how I can legally incur about these fees?

Dave T I during winter time I have to have my utilities turned on because I don’t want to have my pipes burst or something….


I understand what you are saying. I am telling you that you did not give the buyer a chance to deliver clear title. Your agent was apparently in a short sale negotiation with the lender, which would have resulted in a clear title if the lender approved the sale.

If the lender had disapproved the short sale and the seller refused to come to the settlement table with enough cash to clear title, you could have increased your offer a little and the real estate sales agent could have reduced her commission a little to leave enough cash in the deal to deliver clear title.

You pulled out before the deal was dead. You are not entitled to a refund. Just how I see it.

If the deal is not good enough to stay in, then was it good enough to be in in the first place? If it is too good to pass up, why won’t you try to stay in for a little longer? Don’t let your emotions get in the way of a good business decision.