Legal Question in Real Estate Law in Illinois

The earnest money should not be an issue at all. In order to determine if you are entitled to compensation, the doscuments would need to be reviewed.

Your contract clearly has a default and termination clause. From what you say, if the Seller defaults your remedy is solely a return of your earnest money plus $1,000.00 in liquidated damages. If that is true, then that's what you get. You should have an attorney review the contract to verify that this is the case. The contract may also say, for example, that you may also have the right of "specific performance" which means you would have the right to sue to close, but then you could lose your loan commitment, which would be a problem. Again, an attorney can help determine whether you have any other rights under the contract.

As a side note, I am aware of a similar situation where the seller had failed to pay several years of back taxes, over $10,000.00, and it was a short sale where the lender insisted on a no-less-than amount at closing even if it was less than the loan, in order to close things out. In that case, the buyer had to come up with $10,000.00 more at closing to cover the taxes because the contract did not protect against that problem. It's all about the contract.

In rare instances a court may find that if a breach of contract amounts to a "tort" then additional damages may be assessed, but that is a stretch and requires your having to sue, which would be extremely costly. Again, take your contract to an attorney to review. QUICKLY!!!!!!!!!! It may be too late....because protecting your rights may require reccording the contract to put a monkey wrench on title!!!!