Good question. You really need to have a real estate attorney look at the contract. This is typically a common problem with lease to own agreements. At the end of the two year standard agreement the buyer cannot purchase the house or cannot find financing and they loose their $4000 deposit. If the buyer cannot complete the contract they could get kicked out of the house so that the owner can sell it to someone else, or potentially you could sign and new lease. Unfortunately we just can' t tell you ever senario because we cannot see your contract. Good luck.
You will see agents advertising properties for lease purchase, but if someone is interested in that property, an attorney has to write the contract.
But there are a number of different possibilities if both the buyer and seller agree. For example, if they agree, the agreement can be extended for a period of time. This might or might not be accompanied by an additional option fee, or a readjustment of the price.
For example, Joe wants to buy Sally's house. Sally agrees to sell it to Joe in 2 years for $300,000. Joe's been leasing the property, and everybody's happy. However, at the end of the 2 years, for whatever reason (low credit score, rising mortgage rates, etc.) Joe is unable to buy. They might agree to extend the agreement for another year. Period. Or they might agree to extend it for one year if Joe pays, say, $1,000, for an extension. Or they might agree to extend it for a year if Joe agrees that the new purchase price is $310,000. Any of these are possibilities if they both agree.
Or say interest rates have gone up, and now Joe can only qualify for a $290,000 mortgage. Sally could agree to sell the property to Joe for $290,000. It's all negotiable.
As for whether lease purchase agreements are binding... A lease-option is a unilateral contract. A one-way contract. The seller must sell to the buyer, if the buyer elects to exercise the option. However, the potential buyer does not have to buy. He has the right, but not the obligation, to exercise the option.
In a pure lease-purchase agreement, in which the buyer has agreed up front to lease, then to buy, there is an obligation to buy. In some cases, all the documents necessary for the purchase will be signed and put into escrow. If the buyer is unable to buy, then the terms of the purchase agreement come into play. For instance, if the agreement contains a provision stating that they buyer must be able to obtain financing or the deal is null and void, then that provision comes into play. However, the buyer can't simply change his mind, any more so than a buyer in a straighforward purchase can.
Hope that helps. Again, I'm not a lawyer; definitely see one if it's appropriate.
It would depend on whether what you entered into was an actual lease purchase agreement or a lease with option to purchase agreement.
WIth the option, you have an "out", but you lose your down payment/option money. With a lease purchase agreement, you are basically making a promise to close by a certain date (and maybe already wrote out a purchase contract with terms), and the default penalty can be much stiffer.
Definitely contact an attorney and review those documents so that you know your true position.