Buyers have several days to back out of real estate deal

Q. We listed the home we have lived in the past 22 years for sale a few weeks ago. There was much interest and we received two offers within three days of listing the property. The amounts offered were close so we chose the offer that had the larger down payment thinking this was the more solid offer.

Two days after we signed the contract, our attorney received a letter from the buyer's attorney stating he "disapproved" the contract and terminated the deal. No reasons were given other than his disapproval.

We immediately contacted the other interested party but they had already committed to another property. We have had no other offers since the initial two.

Since then, we were told our buyer simply found another property they liked better and instructed their attorney to cancel our deal. This was told to us "off the record" and we don't have any real proof of this.

Who knows now when we will sell our house and if we will receive an offer similar to the one we turned away. This doesn't seem very fair. Can someone cancel a contract simply because they changed their mind?

A. Most form contracts utilized in real estate transactions contain an attorney approval contingency. One of the most commonly used contracts, the Multi-Board Residential Real Estate Contract, contains a contingency that provides that within five business days after the date of acceptance, either attorney may disapprove the contract. That disapproval cannot be based solely on the purchase price.

So, presuming you could not establish the disapproval was based solely on the purchase price, the disapproval and termination of the contract was proper. It is unfortunate you lost a prospective purchaser through this process. However, it does not appear anything improper occurred here.

Q. I have been talking to a guy about buying his house. I can't qualify for a mortgage right now because of a recent bankruptcy but I think he would be willing to do some sort of seller financing. I know you have talked in the past about different ways to do this. What is the easiest and simplest way for me to buy this house?

A. Well, different folks might have different opinions about easiest and simplest, but here is a pretty easy and simple way to accomplish this.

Decide on a purchase price and the amount of your down payment. The down payment is not mandatory. However, most transactions such as this do include a down payment as part of the deal.

Let's use real numbers to illustrate. You agree on a $200,000 sales price and $10,000 down. The seller finances the balance ($190,000) for an agreed period of time, let's say three years. You agree on a 4 percent interest rate and the loan is amortized over 30 years. Amortized over 30 years means that the amount of the principal and interest payments will be calculated as if this was a 30-year loan, even though you will be required to pay the balance due the seller far before that.

In our example, a $190,000 loan amortized over 30 years at 4 percent interest results in monthly payments of $907.11. In addition to that, you would pay the seller, each month, one-twelth of the real estate tax bill and one-twelth of his homeowners insurance bill. You would also pay the monthly association dues if applicable.

Following our example, within three years of signing your agreement (known as an installment contract, or articles of agreement for deed), you would be required to either refinance or sell the property and pay the seller the balance due him. Failure to pay the balance within three years would give the seller the right to terminate the contract and retain all the monthly payments and your down payment.

Accordingly, it is crucial you structure this transaction so financing would be expected to be available to you prior to the date you will be required to satisfy the balance due.

Keep in mind, as in most contracts, everything is negotiable. If you need more time, negotiate for it. Maybe in exchange for more time, you agree to a higher interest rate. Contact a real estate attorney to assist you in negotiating terms and executing the contract.

• 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.