We entered a rental agreement with on 3/10/2007 and on 03/27/2007, we indicated to the landlord that we were no longer interested in renting the property or establish a contract for deed due to the foreclosure proceedings on the property and that the foreclosure wasn’t fully disclosed prior to our signing the agreement.
The landlord provided information on 3/7/2007 stated that all payments on the property were current and there were no foreclosure proceedings on the property. So, we signed the contract on 3/10/2007.
However, on 3/26/2007, the landlord stated she received the foreclosure notice at the end of February and that she was 3 months behind on her payments.
When we signed the contract on 3/10/2007, the foreclosure wasn’t disclosed to us. We had a verbal agreement that we would rent her property for 6 months and would establish a contract for deed after the 6 months. If we had known about the foreclosure proceedings prior to signing the agreement, we would have never agreed to rent the property. It was too risky and we have 4 children to think of.
We have requested on 3/27 and 4/3 in emails to return our deposit of $1100. She hasn't contact us. I called her today and sent another email requesting this. It is our fear that she will say we owe her rent or demand that we pay for 6 months of rent.
Will she be able to sue us for the 6 months of rent and what rights do we have requesting our deposit back?
We sincerely believe that she went into this contract to get our deposit money to pay off her debt and had no intentions of letting us do the contract for deed.
Please advise.

