I would think that if financing was one of your contingencies, you're legally free of the contract whether the seller signs the release or not. What does your realtor advise?

You said could couldn't get financing but you want to move on to buy another house. Can you negotiate on house number 1 to get it into what you can buy? I would ask your atty since this really is a legal question.

As was said above, ask your attorney.

I know this really doesn't matter, but why couldn't you get financing? I always thought that the financing contingency was mainly just a technicality because a buyer really should understand how much they'd be approved for before looking for a house.
Or did the house appraisal fall way short of the selling price?

My contracts have said that if the transaction fell through for any purpose that both parties accepted the earnest monies as the sum of liquid damages --or some such terminology--but what it meant was that the seller could not sue the buyer for any damages if the sale fell through. Check your paperwork for something of the sort. Also your realtor should be able to answer this question directly.

How will you qualify for a loan for a different house if you couldn't qualify for one for this one? A lower price bracket? Be careful! That may still be more house than you can really handle by the time you add in all the associated costs of home ownership.

Could have been the house wan't fanciable to the level that was requested, may have nothing to do w/the OP's situation.

If you cant get financing then you might want to wait a bit until your credit is better or until you have saved more money.

"I am not really worried about the earnest money but the seller is threatening lawsuit and everything else (on what grounds I have no idea). "

really?

Somebody's threatening to sue you but won't tell you why?

There must be more to the story

This post was edited by newgardenelf on Tue, Feb 3, 15 at 5:50

This doesn't make sense to me. If you cannot buy the property, it seems like the seller would want to be quick to sign the release so they can start actively marketing the property again.

How many lenders did you approach to seek financing? Is it possible that paying a higher interest rate would have enabled you to obtain a mortgage?

It's usually not a good idea to sue someone who can't get financing. If you can't get money to buy their house, where do they think you'll get money to pay their judgement?

I wouldn't worry about it.

Here in NC, if the buyer is terminating the contract due to a contingency, all they have to do is send an email to the listing agent, or fill out the Termination Form. There needs to be no response from the seller.
IF you are due your deposit back, and the seller refuses, have your attorney threaten them with filing a Liz Pendens, which will prevent them from being able to market or sell the place.

Here, the seller doesn't have possession of the deposit, it's in escrow through the real estate company (?). When I had a contingency offer expire, the earnest money was returned to me by my own agent, I think.

In my area the deposit is sent directly to the escrow company, recently agents have told me they don' want a deposit with an offer, they don't want any responsibility for the money.

Those agents are doing their buyers a disservice by advising their clients to submit an inferior offer just because they do not want to take on more responsibility. In a multiple offer situation, with all else being equal, this agent's advice probably just lost the buyer the deal.