Breach of contract

[stella_1]

We went under contract to sell our 80 year old home. We provided a lead dust inspection report less than a year old, disclosed a leaky basement and everything else we knew of being wrong with the house. The buyers asked for, and got, a 5K credit to waterproof the basement, and the option to inspect the house and ask for repairs in their contract. They also waived their right to a lead inspection, since we had provided the results of the test we had done and they were satisfied.

The contract loan type was listed as conventional, and contingent upon the sale of their own house. We decided not to do a kickout clause, wishing for the deal to go through because they seemed such a strong buyer and "loved" the house.

Anyway, they were alarmed by the inspection. Among other things, the inspector made a remark to the effect that the house was "full of lead" and that they should have it tested. (The inspector is a whole other issue - already two of the things he cited in the report have been shown to be incorrect - we felt he was doing his best to alarm them, and was free and loose with his opinions which were based on conjecture only - the lead remark and driveway remark being just two of many.)
Long story short, they sent us a list of 37 items to be corrected, including replacement of the driveway (the inspector opined that the driveway was the cause of the water problem in the basement), and other very expensive replacements of items in working condition. They also submitted a lead paint inspection addendum as part of their list, although they had waived the right in our contract. Our agent tried to get an idea from their agent as to the most important repairs they wished so we could find a compromise, and was told the lender had required all the repairs.

Our agent then spoke to their lender and discovered they had applied for a "CDA" loan, which is a loan program in the state (MD) where the house is. Normally, we would have thought the buyers don't want the house, and are giving us an impossible list to complete, so they can declare the contract null and void. However, they had never disclosed to us they were pursuing a CDA conventional, and it was not part of our contract. Having gone through many purchases and sales of real estate in MD, we had never seen such a list, and felt that they had been at best neglectful and at worst deceitful in not letting us know they planned to go CDA. In any case, we also think that their realtor had made a mistake in not including the CDA addendum, and was trying to make it all go away.

We responded with a repair list that addressed the safety issues (mostly electrical and plumbing) that the inspector found, and, since we learned that their lender would not accept the 5K credit for waterproofing at settlement, we offered to lower the price by 5K.
They have now presented us with a release paper saying that since we did not agree to do all the repairs listed, that the contract is null and void.

We however think they are in default, for misrepresenting the buyer's ability to buy the house with a conventional loan, and trying to cover up the fact that they had gone CDA, which, like FHA or VA, is much more "nit-picky" than a true conventional loan. Had we known that they were seeking a state-supported loan, we would never have gone under contract with them in the first place, because we know how tricky requirements can be for old houses - we thought we had a simple conventional loan with a qualified buyer. My realtor tried daily to get their realtor to communicate with her, requesting the CDA paperwork and requirements, to no avail. The lender also refused to provide the CDA requirements list to my agent - and in fact had put the list together without having submitted it to CDA. When asked if they would provide a letter stating the loan would be granted if we fixed everything on the list, the lender said no, that CDA might require more once it got to them. Being stonewalled in this way, our options to act in any meaningful way to make the deal work were stymied almost at every point - and we had acted in complete good faith, and were trying to make this deal go through.

We are preparing to go into mediation, which is the next step. We feel that they will need to forfeit their earnest money, since their choice of loan product directly affected our ability to do the deal, and they did not disclose this in our original contract. We also wondered how they could submit a lead paint addendum to their list of repairs, after having the results of a satisfactory test, and waiving their right to the test in the original contract.
I personally feel that the buyer's agent was trying to cover up her mistake, and overwhelm us into releasing the buyers from the contract, so her mistake would not be addressed.
We wish to address this.

Do we have any valid points in this argument?
Thank you for your time.