You need to invest a few hundred bucks in talking to a construction lawyer. You need to understand your contract and your legal options before you make any sort of a move.

I think you need to talk to a real estate lawyer.

I wonder if the title search done before closing is clean, if an unpaid sub could file a lien sometime later if unpaid. Put that question to the lawyer.

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The'd probably love for you to walk. They'll probably make more money selling it to someone else. At this point, you'd probably be best to get lien waivers from all subs and suppliers and close.

First, I would think about this rationally to decide if termination is the best option. You note that you are getting a "steal of a deal on the price." If the home will sell for more than you are paying, then consider listing the house immediately after purchasing it rather than backing out of the contract. In our current situation, you may be able to profit from selling the house and not have to deal with the problems.

If you decide to purchase the home, either to live in or sell, you should speak to an attorney with some residential construction experience, to identify and mitigate the risk of mechanic's liens on the property from unpaid suppliers. Since there is significant evidence your contractor is having financial problems, don't be tempted to DIY the releases, get an attorney to help you with it.

In my experience, production contracts are somewhat easy to terminate, but it is difficult (if not impossible) to get a return of monies paid. I would be prepared to walk away from all the money you have paid thus far if you terminate, especially given that there are signs the builder is having financial problems. A judgment against him may be uncollectible, so even if he has materially breached the contract, you likely risk the money you paid. The only termination deal I would feel comfortable with would be a certified check or transfer of funds to your account at termination.

Please remember, at this point it really doesn't matter who is right and who is wrong. You are attempting to find an outcome that you find beneficial and the builder is doing the same.

I'm in agreement with Bry911, if he's having financial problems getting any money you paid will be a challenge. I don't know why you'd get invoices from any vendor or sub contractor and hope you haven't paid them, It's the contractor's house and land. There is little to none you could recoup anything you did pay a vendor or sub if you back out. How much do you have invested into this house so far?

The rules to attach a lien on real estate is governed by the state you live in. You didn't mention your location, but the contract should mention or give notice in the contract pertaining to lien by vendors and subs. In many cases a lean by a sub contractor also requires notice before work has begun but again based on your state laws, but the house isn't in your name so any lien would be against the contractor. If his house is sold to you any lien will come with the house if a search didn't find them so you really do need help from a professional on this issue before trying to close, or back out.

Have you locked in on a mortgage or paying cash? If your going with a mortgage the rates are climbing and will continue to rise so don't drag this out if you plan on buying the house, I believe rates may hit 6% by the end of the year.

"lien"...........

"This is not what we want to do (it's in a great neighborhood and we are getting a steal of a deal on the price)",

Now you know how you got your great deal.

Guess that "steal of a deal, " is not such a great deal right now.

If it's too good to be true . . .

You need to talk to a CONSTRUCTION lawyer, NOT a real estate lawyer.

@cpartist said, "You need to talk to a CONSTRUCTION lawyer, NOT a real estate lawyer."

Only two states (Florida and Texas) have a construction specialization. In most states an attorney whose practice focuses on construction is likely to have no certification or be certified as a real estate specialist.

When you pick an attorney it is always preferable to pick one with some experience in cases similar to yours. In the OP's situation this is not really a construction contract, it is a residential purchase agreement for a yet completed home. Limiting your search to a "construction attorney" may eliminate real estate attorneys with significant experience terminating production home contracts and land you squarely on the door step of someone who specializes in commercial construction and has no significant experience in residential and no relevant experience to production type contracts.

In my opinion, the OP is more likely to get better assistance terminating a purchase agreement from someone who would be considered a "real estate lawyer," rather than someone who would be termed a "construction lawyer." Statistically speaking, the attorney who specializes in real estate transactions is simply more likely to have experience terminating purchase agreements for production builds. However, your mileage may vary.

ETA: I will note that I often tell people to find an attorney with experience in residential construction.