Ok, the long and short of it is this:

My husband and I were under contract for a SFH. During that time we submitted a repair addendum and the seller agreed to it in full.

In the meantime, we were getting our loan finalized.  The seller said he would not start repairs until our loan was approved.  We had to file for an extension on the closing date because we defaulted on getting all documentation to our lender.  On Friday, Feb 19th, the seller said that all repairs were completed, which we thought was odd since we didn't get our loan approved by the original closing date of Th, Feb 18th.  So this was a short time of getting lots of repairs done (including a brand new roof).  When the seller countered our extension, he asked us to make a decision by 5pm on Saturday, Feb 20th.  We were fine with that pending the results of our re-inspection.

We had the property re-inspected at 11am on Saturday, Feb 20th, specifically for the repair addendum items.  Roughly 50% of the repairs were done, at best.  This includes the roof he said he would replace but only about 25% of the work was done.  Therefore, we did not respond to the seller by 5pm on Feb 20th deadline.  Instead, we sent a termination and release of earnest money back to us.  If we trusted the seller to make the repairs correctly the first time and he didn't, shame on him.  We are not going to trust him to make the repairs a second time, then pay for a THIRD inspection. 

Today, the seller's agent is saying the seller is threatening legal action if we don't release the earnest money to the seller and pay any other possible damages because we aren't moving forward on buying the house.

I feel very confident that anyone could see how the seller didn't hold up his end of the repair addendum and we have an inspection report to prove it.  Its not just one thing, its numerous and glaringly obvious things that the seller perhaps hoped we would not catch.

However, I'll be the first to admit that my husband and I didn't have 100% of our documentation in to our lender by the closing date (we were about 99% complete).  BUT!  If the seller had fixed everything he promised to fix on the legally binding repair addendum with 100% accuracy and code compliance, we would have said yes in a heartbeat and we would be closing this week.

We have not gotten a letter from an attorney.  But I could see a judge saying something like, "Both of you defaulted.  You split the earnest money."  Then we will be going through a bunch of stress for nothing, for pride.

But, based on the information and perspective you may be able to provide, I may be able to see it in a different way that I have no idea about. 

This weekend I was at peace losing the earnest money and washing my hands of it.  My husband says, "F that S!  We're not giving our money to a seller who won't hold up his end of the deal."

I realize this was more "long" than "short" but thanks for reading all the way to the end!  I can't wait to hear what you all have to say.