Seems like a tough spot.
As far as financing, best to contact several different lenders and see what your options are. If you need referrals, we'd be happy to provide you with several as we work and are based out of Chanhassen.
As far as the contract goes, we have not personally dealt with contracts that are not directly from the first owner...having the middle man there is definately complicating. We would contact a real estate attorney, again we can recommend one locally. Was there a clause in the contract that if one of you defaulted the contract was null and void or any ramifications for it (him defaulting on a payment for example). Was the contract written up by the realtor without a protection clause for you? You may be able to file an ethics complaint against the realtor. You can find more about that a the MN department of commerce website.
Best of luck to you with his hard position.
More info: http://www.mnrealtor.com/Content/NavigationMenu/Professional
You probably don't want to hear this - but you also need to contact a real estate attorney. Contract for Deed's are complicated matters and you need the advice of someone who can view the entire situation for you and give you solid legal advice. Contracts have certainly been violated here and there are certainly remedies available to you but you need to speak with an attorney about them.