We were set to close on a house today, upon review of the documents an addendum had come to pose an issue.  An addendum was issued with a specified amount for the purchase price and an amount was set to be held in escrow until an inspection could be made on an item that could not be inspected due to weather.  It was returned the following day with a counter offer for the amount to be held in escrow for the delayed testing of the item, which was agreed to and the line item was initialed.  However what was not caught by anyone (realtor, title company & us) was that the seller crossed out the sale price of the home and increased it by several thousand.  This line item was not initialed by the seller or buyer.  The closing papers were a complete train wreck and we withdrew from the deal & requested our EM back.  We are being told we may be facing litigation.  Thoughts on our exposure to litigation & consequences ?

Im not a lawyer but you didnt sign the price change.  Fuck them. Not sure what it will cost you to win but seems like you are in the right if you are willing to purchase at the price under the cross out.

Did you happen to sign an alternative dispute resolution amendment with the seller?  This is required for all of our transactions.  I'm an Indiana broker.

No alternative dispute form, it's just the same addendum with the with the escrow amount modification cut and pasted in that was initialed by me and the alteration to the sale price was struck and the alteration typed in.  

Thanks for all the input & help

If you did not ever sign the agreement to change the price there will be a conflict.  I can't say for certain about what to do in regards to litigation but speaking with an attorney right now would be your best bet.

Maybe my old personal experience might help here.

We signed a P&S in CT a long time ago. It was based on all terms agreed to by all parties sitting around their kitchen table. The seller decided to review it with an attorney before signing. A few days later they had modified it to increase the earnest money, allow them to live in their self-contained RV on the property indefinitely and store their stuff in the garage indefinitely. I canceled the deal and was told that they didn't want to return the earnest money. I told my broker to tell them that they had 2 days to return the money or I would sue them. I got a call back an hour later to come pick up my earnest money.

Using this tactic is very likely to work as I've been told that if any party modifies the contract, prior signatures are null and void.

Good luck.

Thanks for all the input guys !

A contract that has been changed is not a valid contract. The closing agent has the final figures as agreed to the price, just how do the sellers think that they can change the price and not have it affect the closing figures?

This.
Over and over.
Make any mark besides your signature and the contract
is now invalid unless the other party agrees to the change.

Litigation hurts them more than you, especially if they need to sell quickly.  If they sue then your attorney will file a lis pendens which means no other buyer will touch it until the suit has concluded.

BINGO.
I would be surprised if they can find an attorney that would get involved.
Sounds more like an RE person giving bad advice to their client.
How old is their RE team?
Years of experience?

Thanks for the input all, been on the road for a few days.  Our RE has quite a bit of experience however it is my opinion that they are in cahoots.  We told our RE that it was her job to be advocating for us....…..she started stammering.  She is now requesting an update from the sellers agent and will be talking to her legal dept. as no funds have been released.

Absent a buyer agreement with the agent, they represent the seller, not the buyer.
They are pledged to treat all parties 'fairly' but that is in whose eyes?

It sounds like the Sellers's principal agent (the 'listing' agent for the place) tried to slip a change past.
That is a really big red flag and could cost people (agents and brokers) their licenses.

I am very familiar with Virginia RE rules and regulations.
Agents WORK for a BROKER.
The Broker is responsible for their actions.
It is their job to supervise all the 'agents' working for them.

Attempting to sneak a contract change to the settlement table
could well cost both the agent and broker their licenses.

I had a broker I had a signed long term agreement with.
She did represent ME.
And everyone new it all the time.

We had a long and profitable relationship.
She would spot 'Old Lady houses' (older wife selling family
home many years after husband died) or estate houses
(heirs looking to unload their inheritance).

Most of them had not been maintained all that well or
updated in 40 to 50 years.

The sellers would look at sales in their area and expect top pricing.
They did not understand that almost all of those houses had been
well maintained and updated.

I would purchase the place, update and restore, then sell for a decent profit.
A very few times I missed on the repairs that would be required.
I then had to hold the houses and rent them out until the market moved up.
I sold a number of them to guys that worked for me (tradesmen) that had lousy credit.
I gave them a helping hand and everyone of them paid me on time.
Rent with the option to purchase.
I gave them a credit each month, and more if they completed additional improvements after proposing them.

They got a bargain. I made money.