Buyer wants $5,000 back after deal falls through

Q. We were attempting to purchase our first home last month. All was going fine until our mortgage company's appraisal came in. The appraisal was about $20,000 lower than the contract price. Our attorney requested that the sales price be lowered to the appraised price but the sellers said no. At that point, we decided to cancel the deal, get our money back and move on.

Our attorney sent a letter to the seller's attorney canceling the deal but she responded saying we could not get out just because the appraisal came in low. She made an offer to split our earnest money ($5,000) but we said no. This is where it has stood now for a couple weeks. Our attorney tells us we may have to go to court to get our money back.

Is this true? Do we really need to hire an attorney to get our money back? We have done everything everyone told us to do and now we're in danger of losing our $5,000. We can't believe this.

A. In all likelihood, you will receive your deposit back without filing a lawsuit. It just may take some persuasion.

Many attorneys include a provision in their attorney review letter providing that in the event the property fails to appraise for at least the amount of the purchase price, the purchaser has the option of terminating the transaction and receiving their deposit back. This has become a popular addition to attorney review letters since the real estate crisis and subsequent leaning toward conservative appraisals. If this provision was included by your attorney, there is nothing to argue about. I suspect it wasn't included, but don't despair.

Your contract almost certainly included a financing contingency. This is a provision that states that in the event you cannot obtain a loan for a stated percentage of the purchase price, under specific terms, you can terminate the transaction and receive your deposit back so long as notice of your inability to obtain the mortgage is timely. Given the significantly (I presume) low appraisal, you will most likely not be able to procure financing under the terms specified in the contract. If that is the case, a letter to seller's attorney indicating your inability to obtain financing together with a denial letter from your lender should get your funds released.

In the event you properly terminate the contract and sellers continue to refuse to release your deposit, court may be your only alternative. In your favor, however, is that most form contracts contain a provision that in the event of litigation involving the contract, the non-prevailing party shall pay the prevailing party's attorneys fees and costs. Often. once this provision is pointed out to the seller, the matter gets resolved peaceably.

Q. I sold my home to someone in February. A few days ago, the buyer called me and said she was sending me over a copy of the real estate tax bill and that I needed to pay it. She said the bill was for 2014 taxes and I owned the property in 2014. Is it true that I owe this?

A. No. Take a look at the closing (HUD) statement you received at your closing. You will most likely see credits given to your buyer for 2014 real estate taxes. Those credits were made to compensate your buyer for taxes that had accrued (2014) but were not yet paid.

• Send your questions to attorney Tom Resnick, 345 N. Quentin Road, Palatine, IL 60067, by email to tdr100@hotmail.com or call (847) 359-8983.