Lease Option home won't appraise

[Runamokdog]

We placed a substantial ($10,000.00) down payment on a home we intended to buy a year ago. We needed the year to get our finances in order. The contract says that the 10,000.00 is to be applied to the down payment. However, last fall the seller had the house appraised (he was hoping to refinance) and learned that the house is now valued 15,000.00 less than the agreed upon selling price. We know that no lender will finance a house for more than its appraised value and the seller cannot afford to reduce his price (he now owns more on the house than it is worth). Do we have any option for getting our deposit back?

 

[doubletrouble]

I was curious as to how your contract is structured. What exactly do you consider this 10k to be: a "deposit" or a "down payment". Because at first blush it appears to be neither. It may instead be an option fee. Is there any language in the contract that specifies what condiditions would need to exist in order for that 10k to be refundable? Also, was this contract done in tandem with a lease agreement?

 

[Runamokdog]

It is a purchase option to be applied to the purchase price of the property. Yes, it was done in tandem with a lease and the lease stipulates that we will receive principle credit equal to 90% of the principle credit from the master mortgage held by the lessor.

 

[doubletrouble]

Understood. When you entered into this agreement it created a joint interest in real property. Oh well. The value of your joint investment went down. Obviously the seller has lost money (on paper); probably considerably more than that 10k you stand to lose. Now if you expect a refund from the seller for your loss, as well as the loss he's already taken, well, put yourself in the seller's shoes for a moment... He'll refer back to the contract and look for a way to avoid refunding it.

So what obligation does the seller have to refund your 10k? What does your contract say about that?