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Building a House - Buyer Offering to Buy Old House?

Two months ago, my parents put their house on the market and started to work with a builder on a townhouse. It was a situation where they put $5k down as a non-refundable deposit and worked with the builder to customize their unit. The realtor claimed their old house would sell fast, but that isn't happening (originally listed for $350k, price drop last week to $315k). The house isn't moving and (being in MN), probably won't until spring.

They were supposed to close on the new home last week, but couldn't secure new financing since their old house wouldn't sell. We are in a situation where my parents are going to be walking away from this house. I have a couple of questions the sub might be able to answer.

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  1. They broke the news to the builder that they were walking away and understand they are losing their $5k deposit. While not a threat per se, the builder alluded to the fact that he could sue my parents for the $20k in upgrades he made to the new home. If a suit was brought, what are the chances he could recover this from my parents? Nothing was outlined in the contract about upgrades and he still has the house and upgrades to sell to another family.
  2. The builder also floated out the idea of my parents selling their old house to him and he would sell it in the spring. (Basically having a $315k house as a liability is better on the books than a $400k house). I'm seeing this as any other transaction; just this time the builder is the buyer. I assume he'll really try to low ball by parents on price, other than that, are there any things I should be aware of in a situation like this? Is this normal? To sweeten the deal, my sibling has offered to rent the house throughout the winter, but I'm feeling that should not be put in the selling/purchase agreement (in case anything happens like she can't make rent).
submitted by /u/Senor_Gringo_Starr
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source https://www.reddit.com/r/RealEstate/comments/dpeziu/building_a_house_buyer_offering_to_buy_old_house/
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