My husband and I purchased a home contract for deed 21 months ago. We knew the people selling it and let that cloud our judgement! We knew we were paying a premium for the home but only after talking to the neighbors did we consult a realtor and realize it was about 40,000. The purchase price was 340,000 and the realtor said he'd have been lucky to get 300,000 for it that market at that time. Since then we have fallen on financial trouble and have gotten behind on other things to stay current on the house payment. Our credit is now in bad shape and I know we will not quality for a mortgage in 15 months especially one of that size when the home is not going to appraise at near what the balloon payment is. I don't want to put any more money into this home when I know we aren't going to be able to make good on the balloon payment. Because the more payments we make on this the worse our credit will get. We have tried working with the seller but he hasn't been very cooperative. I feel guilty defaulting if it's going to be detrimental to his situation. I know he ows a lot on the home because he cashed out the equity he had at the time to built his current home. He says he did this as a favor to us. What should we do?

Thanks, Sue

p.s. Soon after the close we discovered problems with the home that he had not disclosed to us. Heating and cooling system not adequate for the size of the home do to a prior add on... things like that. We know it was our responsibility to have an inspection prior to and that we are at fault for not doing so, so we have just delt with it as it comes. Also, there were things he agreed to have done by the time we moved in that he was still completing days later. The painting that he promised to do never did get done.

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Originally Posted by Sue09161989

What should we do?

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Hello Sue:

Get a second job. Cause you're going to lose whatever payments you made, and you'll lose any down payment you made and he can (and probably will) sue you for the difference between what the house is worth, and what you owe.

If he transferred his $40K negative equity to you, you're right, you shouldn't have taken it on, but you did.

So, in my view, it's going to cost you MORE to default, and you're not going to have a place to live anymore.

If he breached your contract by not doing what he said, THEN was the time to deal with that. You can't use that as grounds to break your contract now.

excon

You need to read the contract. Most contracts for deed allow the buyer to walk away which means that everything they have paid is forfeit, but they will owe nothing more. The seller gets the property back to resell.

Unless your contract has penalities for defaulting, then you can just walk away as long as you are prepared to lose what you have paid.

I wouldn't be so sentimental about the seller. He took advantage of you by jacking up the price. Then took further advantage by not disclosing problems and even more, not doing what was promised.

If, however, you don't want or can't afford to lose what you have paid, then you have to get a second job or whatever it takes.