Termination of contract and earnest money

UPDATED: Sep 30, 2022

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Termination of contract and earnest money

We were in the process of purchasing a home when we discovered it was in a flood
zone and insurance was going to be outrageous. This was never disclosed to us.
The lender discovered it. We terminated the contract based on the inspection. Now
the seller is refusing to sign saying it is not valid so we can not get our 10000
earnest money back. Do we have any legal ground based on failure to disclose

Asked on June 2, 2016 under Real Estate Law, Virginia


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

Failing to disclose a known flood zone is fraud: if the seller committed fraud, you have grounds to sue to recover your earned money and likely other costs incurred due to the fraud, such as if you paid for an appraisal, a mortgage application, a title search, etc.
The issue is whether the seller knew or reasonably must have known (any reasonable seller in his/her place would logically have known) of the flood zone; obviously, if he/she was paying for flood insurance, he/she would have known. If the seller knew, it was fraud to not disclose. But if somehow the seller did not know--maybe his lender and insurer had never discovered this, so he was never informed and never paid any additional amounts--then it is not fraud and he may keep the earnest money due to you terminating the contract; you also would not be entitled to your other costs.

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 AttorneyPages.com 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.

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