Expert: Karyn Foley - 7/8/2009

Question
Hello,
I was recently in the market to buy a townhouse in Maryland. The property of interest was a short sale property. My real estate agent placed an offer with the owner and her real estate agent. At the time the offer was declined and so I moved on. Several weeks later I received a call from my real estate agent telling me that the owner had changed her mind and would like to accept my offer. We resubmitted the offer in writing and the contract, which was signed by myself and the seller. A week later the third party bank approved the offer also. The settlement date was set for 30 days later. Once everything was in writing I applied for the loan and paid the application fee, which included the fee for the property appraisal. I also had a home inspection performed. Six days before settlement the seller decided to not sell the house and did not show up at settlement. I did however show up to settlement and in turn fulfilled my duties of the contract by bringing my down payment and showing up on time.
My question to you is...would I be able to sue the seller and have a viable case in small claims court for my loss of the home inspection fee and the appraisal fee since the seller's actions of breaking the contract cost me money?

Answer
Dear Danielle:
 I am so sorry to learn about this problem. However, as I do not have copies of the actual documents, I can only respond with that in mind.  Also, short sales are historically very problematic and many buyers thus do not wish to deal with them.  In this buyers market, it may pay to enter into a transaction with a seller who has no strings attached.
 In a short sale, the seller may be able to accept an offer, but the bank may have to approve and sign off on this.  The protocol may differ from state to state.  In your deal, who actually is the person who makes the final, official decision?  Did that person sign off?  Did the bank accept the house in their short sale program, or was it subject to the bank approving the short sale?  All valid questions to which you should have the answer or be given the true explanation.  if indeed the third party bank approved, did they truly sign off on your offer as the offer accepted or merely that they received the offer?  Was this short sale circumvented by the seller paying up on the mortgage making it current and up to date?
 I would demand answer from your agent and from the bank, and see that these answers are backed up by documents that you had already seen and signed off on.  
 Here in California, we use escrow companies as a neutral clearing house for documents in real estate transactions.  Other states use title companies, and others use attorneys.  Who or what did you use?  They should also be able to give you answers.
 Please be aware that I cannot offer legal advice, as I am not an attorney.  You may wish to resolve this with firm legal direction offered by an attorney.  You should be on solid legal ground prior to seeking redress - even in a small claims situation.  It confuses me why you are not asking if you could address making the seller sell you the house of your contract is enforceable?
 I am very interested in the outcome, so please let me know what direction you take and why, and what is the ultimate decision.  Good luck - I hope you prevail.
KARYN FOLEY