My wife and I recently purchased what was listed as a 3 bedroom house. A week before the closing I receive a call from my lawyer that the seller could not attain a C/O for a 3 bedroom house because the upstairs converted attic(which was the houses 3rd bedroom) is not up to state code for habitable areas. So now what was listed as a 3 bedroom 1500 Sq ft home is essentially a 2 bedroom 900 sq ft home with a large attic for storage. The seller refused to lower the price of the home significantly enough for my agreement and threatened if I tried to back out on the deal he would retain my nearly $40,000 deposit because I am breaking the contract. I say the contract I signed was for a 3 bedroom home which I am not receiving and is therefore already void. Can I Back out of this deal and get my deposit back

You have a breach of contract, you contracted for a 3 bedroom home, and by state code they don't have a 3 bedroom.

Is this sale going through a realtor?

Since they cannot fulfill the contract all deposit and earnest monies should be refunded.

Speak to an attorney.

Forum member LisaB4657 is an attorney may be about to ask this question.

Yes this is going through a real estate broker... I contacted my lawyer and he said I should get my money back but said he gives no guarantees. The homeowners claim that they have been paying taxes on the house as a 3 bedroom (which I checked and apparently they were) but when the town inspector came to check the house he said it was illegal.

Bottom line is you contracted for a 3 bedroom, it is not your problem that the owner has been paying taxes on 3. Since the inspector states that they only legally have a 2 bedroom, they breach the contract not you.

You were willing to continue if the seller lower the price, they refused, breach occurred on their part.

They should have had all of this done prior to listing the home.

"town inspector came to check the house he said it was illegal."


Are they trying to get you to contract on something the is illegal,

What are the term of your contract you signed, and did the seller accept and sign the contract. Both parties must live up to the terms of the contract.
If one party fails to deliver as stated in the contract an breach has occurred.

Check if your contract has a paragraph that says something to the effect that the seller represents that the house complies with all applicable codes and laws. If so, then the seller has violated the contract and you have the right to terminate it and receive a refund of all deposit monies.

Also, does the contract make any reference to the realtor listing? If so, does the listing state that it is a 3 bedroom house? Since the house is not a legal 3 bedroom house the seller has violated the contract.

If I were in your position I would instruct my attorney to send a certified letter to the seller (or seller's attorney) demanding that the seller either:

1. deliver written proof that the 3rd bedroom complies with all applicable codes and laws; or

2. reduce the purchase price to an amount that would be acceptable to you for a 2 bedroom house; or

3. return all deposit monies you have paid, plus reimbursement to you for any title search and survey fees you have spent in connection with this contract.

Have your attorney review the real estate contract,

Of course the deposit money should be in escrow with the reality company, not in the pocket of the person selling the home. I would say that he has little say if the real estate company agrees that the contract is in breach.

But again they can say no they won't give you the money, and you and your lawyer may have to sue them in court.

Just a thought: As this one seems cut and dried, you might save yourself a bunch of money by trying your local or State Board of Real Estate before an attorney.