Buyers Liability: What If The Deal Falls Through?

A: If you, your son and his wife signed a contract, each of you is responsible under the contract. If you, as buyers, default under the contract, the seller can pursue each of you as the contract might permit.

You have indicated that the purchase might go under. If it goes under because the seller has failed to perform under the contract, you probably don’t have to worry. If the deal goes under because you, as buyers, don’t want to close, or can’t, you will need to review the contract to determine how your failure to close will affect you.

Some contracts specifically state what will happen if a buyer fails to close on a purchase. The contract might say that the seller gets to keep any money deposited by the buyer as a good faith deposit, or earnest money, under the contract. In some cases, the earnest money deposit may be the only money the seller can get. If you, your son and his wife put down some money, it may be possible that you will lose your deposit and nothing more.

Be careful, though, because other contracts might permit the seller to sue you for your failure to close and entitle the seller to be made whole. For example, if the seller ends up selling the property to another person and sells it for less, you, your son and his wife will have to pay the difference and any additional costs incurred by the seller.

You should really talk to an attorney to walk you through the contract and help you determine what your exposure might be under various scenarios.

Finally, if you are involved in litigation with the seller and lose, any money or other assets that are in your name can sought after by the seller to pay off the judgment of the court. While there are long-term planning strategies to protect a person’s assets, these strategies tend not to work when creditors are knocking at the door. If you have significant assets that may be at risk, you must talk to an estate planner or estate attorney to help you figure out what assets you can protect going forward, and how this can be accomplished.

Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is The REAL U Guide to Bank Accounts and Credit Cards. This column is distributed by Real Estate Matters Syndicate. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher. If you have questions for Sam and Ilyce, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com.