Appraisal sqft was over 10 less than the sellers represented on MLS, can we back out of contract and keep earnest money?

UPDATED: Oct 1, 2022

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

UPDATED: Oct 1, 2022Fact Checked

Get Legal Help Today

Compare Quotes From Top Companies and Save

secured lock Secured with SHA-256 Encryption

Appraisal sqft was over 10 less than the sellers represented on MLS, can we back out of contract and keep earnest money?

Appraisal came back with 2536sqft and the sellers listed 2839sqft on MLS. We used price per sqft to calculate offer price and purchase price. Now the appraisal came back from the lender with 303sqft less than what we expected per sellers My clients tried to renegotiate sale price but sellers did not want to. Now we want to back out of contract using paragraph 19, false representation by sellers prior to closing. Can we get our earnest money back and back out of the contract?

Asked on September 11, 2017 under Real Estate Law, Texas


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

Most likely you cannot:
1) Fraud is a knowing (or intentional) misrepresentation or lie; being mistaken is not fraud and generally is not grounds to rescind the agreement. So you'd have to be able to show that the sellers knew (or logically must have known) that the square footage was less than they listed in order to establish that this fraud and get out of the contract, and that it's not simply that the sellers honestly thought it was more sq. ft.
2) To rescind a contract based on fraud, the defrauded (lied to) party must have reasonably relied on the misrepresentation or lie. However, if the buyers saw the home before placing the bid, the law presumes they proposed a price based on what they perceived with their own senses, not based on the listing; it is not reasonable to rely on what someone wrote down about sq. footage (especially given that sq. footage estimates are notoriously unreliable) when you actually saw the home with your ownn eyes and could decide based on that how much you want it and what you are willing to pay. So if your clients saw the home before bidding, they would most likely not be considered to have reasonably relied on the listing, and so it would not be fraud.
Based on what you write, it is unlikely that that this grounds to get out of the contract.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption