I am in the state of Georgia and was in the process of a Lease Purchase directly with the builder of the home - two months into the deal, we found out the home is being foreclosed and auctioned next week.
Since our agreement is with the builder, isn't our contract void at this time? We also have $2K earnest money paid to him that we are entitled to get back - right?
We are very concerned that we will never see that earnest money again AND he's pressuring us to pay the full monthly amount which includes $400 that was to go toward the purchase of the house -
What is our recourse here?

Have you seen the notice in the legal ads? It will show the name and phone number of the attorney handling the foreclosure. Call that office - some of them have foreclosure departments - find out who is conducting the sale and tell him/her you are a tenant, and that you need to know whether the sale is going to happen or be postponed; you probably should attend the sale and see whether it takes place; the builder could file bankruptcy 15 minutes before the sale and have the auction postponed for a couple of months just that easily. If the builder retains the house, you will owe the rent; if not, I wouldn't pay it. If you have a way to back out of the real estate contract, you may want to do so now and demand the earnest money; if he doesn't pay, then sue. It sounds as though you need to retain your own attorney to protect your interests as far as this property is concerned. It may be subject to all kinds of liens.

Yes, we received in the mail the letter from the attorney's handling this matter - my husband contacted them, told them that situation that we have a lease purchase agreement with the builder and they bascially told my husband that they couldn't discuss anything with us, the only thing they could tell us was that the builder could pay in full, make some type of arrangement with their office or file bankruptcy - the builder told us thathe couldn't pay it in full and that his buisiness partner was going to the courthouse to try and win the bid on the home - we have already gotten an apartment and are starting to move out. We don't want to get caught up in any of that, we just want our earnest money back - he is also calling and wanting the full monthly payment which includes money toward the purchase which we are obviously NOT doing now - I also have read where that is called Rent Skimming and is against the law - he obviously wasn't taking our money and paying the mortgage with it -

You may owe the rent up until you surrender the keys, but the foreclosure may represent a breach of contract on the seller's part; if so, you may be entitled to your earnest money so review the contract and see what must be done to collect. You have to sue the correct party.

Well we don't want to sue anyone of we can help it - our agreement is with the builder only and that's who we gave the money to and made the contract with - we aren't out to cheat anyone either but since we've only been in the new home for two months when we got the letter from the attorney, it seems pretty clear that the builder knew what was coming.. I mean, he hadn't paid any money in six months at least! And he knew this when we made the contract with him. We just aren't going to throw good money over bad at this man - we have to have downpayments and deposits all over again now for a new place to live...

I like the idea of talking to an attorney, especially if you intend to get your money back.

Why would you make the statement that you don't want to sue somebody?

In a case like this one, the builder obviously was not in the least concerned with what position he put you in was he?

It is very likely that without legal action, you can just write off your earnest money.

I only meant that as far as suing someone, it's never as easy as it sounds - (I work for attorney's)... it was my HOPE that we could resolve this as adults without outside interference, but if not I would take the legal route - It's a couple of thousand dollars and if we really pushed it, I could pile on moving fees, deposits, etc... everything that wehad to come out of pocket for because we had to move... No, I'm not giving my money away...
I was just curious as to how much, if any, of this current months payment that he was legally entitled to get.

Please understand you will end up sueing him, he is losing the home for not making the payments, even with you making rent payments, do you think he has the money in the bank to pay your escrow deposit back to him? Of course he most likely does not have a penny to pay you.

Do he will be in default if you keep your side of the contract till the day it is officially foreclosed, and not only your escrow deposit money but part of your payments that would be considered more than rent toward purchase can also be sued for.

I mean OK, in the perfect world, he will write you that 4000 check the day you move out, and in the perfect world I would be president

You have a contract. Until the builder reneges on that contract you are required to fulfill your end of it. As you have been told the builder could do any number of things to forestall the foreclosure. So until the foreclosure is finalized, the builder owns the property and has not reneged on the contract. If you stop paying or move, the builder can keep your earnest money and sue you for payments on the contract.

Unfortunately, you are caught between a rock and a hard place. My advice (besides consulting an attorney) would be to go to the sale and put a bid on the house, assuming you can get financing.