I am purchasing a house, and apparently the seller owes more on it than what he listed it for. His realtor is now asking me if I can come up with 4000 dollars to be able to close. Is this legal? If I don't come up with this money (that is technically not my responsibility) will the deal really fall through?
It is certainly legal to ask you, but you are of course not required to 'donate' another 4000 - that is your choice.
If the deal falls through because of these 4000, it is the seller's fault, and you could sue him for your damages - whatever you invested/paid to get into this closing. Probably not much, but I wouldn't know. Also, chances are that if he is underwater with his home mortgage, he doesn't have the money to pay you even if you win in court, so you'd end up getting only a worthless sheet of paper.
The deal should not fall through for 4000, though. Normally his bank will accept the deal, and he will end up owing those 4000 to his bank still. The amount is probably small compared to the complete mortgage, and the bank would prefer to get the big chunk now and run after the 4000, instead of potentially getting less or nothing later.
So basically, the seller is just trying to sucker you into covering his 4000-problem.
it is legal frm them to ask. As this point you have a right to walk away and sue them for their time spend because of false advertising (see, they want MORE than their listing - the fees are THEIR problem, so essentially they lied with the listing). There is a fine line between negotiations and fraud and if you make someone else expense energy and time and money because of giving false information you are liable.
Generally this is a liar style negotiation. They say "we list for X" but then they keep up adding other things to the price to ramp the price higher. How high their mortgage is does not matter. They could have waaaay overpaid on the house - so what, their problem. Obviously the ank will not release the house, so they need to pony up the money now. Well, there are hopefully other houses around, or you basically decide to pay a higher price. 4000USD does not sound like a big change (depending on the house) so just ponying up the money may be worth it -but it is YOUR decision, not theirs. You have no legal obligation to pay more.