My wife and I paid off my stepdaughter’s $415K mortgage in exchange for her house, but it’s now worth $310K. Should we sue?

My wife decided to agree to purchase a home from her daughter, my stepdaughter. As her daughter is family, a simple agreement was drawn up, not an actual real-estate contract to purchase. The agreement was for us to make periodic payments, large payments, while her daughter paid off the mortgage on the house.

In the agreement, there were four homes in her daughter’s rental portfolio that were named as collateral. There were no terms in the agreement pertaining to a prepayment penalty on the loan she took on the property, and nothing noted in regard to force majeure even though the home was in Florida and within one mile of the water.

In September 2024, the home was devastated by Hurricane Helene. We had already given $375,000 towards the purchase price of $415,000. There was one $40,000 payment left, due in January 2026. As we never took title to the home, we asked for the price to be reduced, based on the condition of the home following the storm, or to reimburse us for our full investment.

In response, my stepdaughter said she wanted to continue with the agreement as written. She told us we owned the home based on the agreement, even though we felt the agreement was in breach since all four of the collateral homes were sold without giving us notice. She also never made any attempt to revise the agreement and add any new collateral.

We were told that we would be responsible for the loss in value, plus a repayment penalty of more than $10,000. The sale was not enough to pay off the remaining mortgage, nor the significant prepayment penalty. She took our final $40,000. payment not due for another 13 months, to satisfy the full pay-off due. We were now into the agreement for the full $415,000.

We are 71 and 67 and can’t afford this kind of loss in retirement. She refuses to repay the remaining money until January 2026 since that was the term in the original agreement, and will not pay any interest on the remaining amount she has agreed to pay. We are left with a home worth $310,000 — not $415,000.

We never took the title because she had a mortgage that she could not afford to pay off.  The agreement says she would pay off her loan and deed the property to us. Now that it has been flooded, it is no longer worth $415,000.  She also is charging us the prepayment penalty she incurred on the loan when she bought the house prior to our involvement.

Since we never had the title, and she owned the home at the time of the hurricane and subsequent flood damage, we don’t feel we should be obligated to complete the sale and asked for a full refund of the money we had given towards the agreement. In addition to the flood damage, she sold the homes documented as collateral in the original agreement.

Short of suing our daughter, is there anything we can do?

Stepfather

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Loopholes in a contract can benefit both parties.

My sympathy lies with you, your wife and your stepdaughter. If you agreed to pay $415,000 you should stick to that agreement. Or split the difference. As the legal owner, your stepdaughter should foot the bill for the prepayment penalty. Insisting that you pay the penalty is gaming the system. After all, the home does not belong to you until she decides to sign it over, assuming she does sign it over. Overall, this arrangement has left you open to legal and financial jeopardy. As agreements go, it’s a hot mess.

You all bear the responsibility for this unfortunate mess. You and your wife were getting a house, which you were either going to sell for a profit, rent out or live in, while your stepdaughter received a large cash sum to move on to pastures new. In every letter of legal woes, there is nearly always a casual throwaway line — “As her daughter is family, a simple agreement was drawn up, not an actual real-estate contract to purchase” — that stands out like a sore thumb.

By your own admission, you all failed in your duty to write an airtight contract that includes provisions for what happens if the house falls into negative equity or somebody breaches the terms of the agreement. If these four properties, which were supposed to be used as collateral, are sold, does that force the sale of your stepdaughter’s house? If the house is destroyed or damaged by bad weather, does your stepdaughter have a duty to repair the property?

Only a lawyer, having reviewed the agreement with your stepdaughter, could give you a final answer on the validity of your agreement. However, in Florida, under the doctrine of equitable title, you and your wife — as the buyers — would gain an equitable interest in the property, even while your stepdaughter holds the deed. For that reason, Alexander Stratigos, a tax attorney based in St. Petersburg, Florida, strongly advises you against taking a legal case against your stepdaughter.

“Suppose a new valuable development went into the area and increased the value from $415,000 to $515,000 during the time the stepparents were paying off the mortgage. The doctrine of equitable title ensures that the appreciation remains with the purchaser with equitable title,” Stratigos says. If the shoe were on the other food, in other words, you would benefit. You might feel, in such circumstances, the same as your stepdaughter now feels about being asked to absorb losses that, in all likelihood, belong to you and your wife.

A force majeure clause, as you are probably aware, details what happens if an “act of God” prevents either party from fulfilling their contractual obligations. As this was not a bona fide real-estate contract to purchase this house, too much may have been left to chance. A solid agreement to purchase this property would include the parameters that would invoke a force majeure clause and outline what steps should be taken if such “unforeseen” events impacted your contract.

Force majeure is not always clearly defined, says Lakewood Ranch, Fla.-based Battaglia Law. “This can lead to disputes between the parties if an event occurs that frustrates or prevents one side’s performance, and the other party is not in agreement with the other party’s non-performance. If this occurs, it is foreseeable that litigation will ensue, in which a court must determine whether a party’s non-performance was excused under the contractual terms.”

Standard contracts that abide by the rules of the Florida Association of Realtors and the Florida Bar do, however, define force majeure. They, according to Battaglia Law, include “hurricanes, floods, extreme weather, earthquakes, fires, or other acts of God; unusual transportation delays; wars, insurrections, civil unrest, or acts of terrorism; governmental actions and mandates, government shut downs; and/or epidemics and pandemics.”

If the house had increased in value by $100,000 would you insist on paying more? Or would your stepdaughter pay off the loan, and sell the house, pocketing the $100,000? The problem is your stepdaughter is abiding by the main terms of the contract. As you say: “The agreement says she would pay off her loan and deed the property to us.” It makes no mention of what would happen if the value rose or fell by the time that happened.

If you take legal action, you are far from guaranteed a ruling in your favor.

Related: My wife asked for a divorce after 21 years. She wants to buy a house with our savings, but promises to help pay my mortgage.

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