Seller Threatening to SUE on First Rental Contract

[Kaushik Mahorker]

I recently went under contract for my first rental property in Ohio. I had gone through the due diligence of getting an inspection and there were a significant number of repairs. I wanted to get a full estimate of the repairs, so we extended the due diligence period mutually from 3 to 6 days. Both parties came up with repair estimates (full story on that here: https://www.biggerpockets.com/...), and verbally the sellers decided that they could not meet my request of the repairs. So my agent sent over a Removal of Contingency document on that 6th day (still within the agreed due diligence period) asking for the repairs (knowing beforehand that this request would not be met). The Sellers now have three days from receipt of that document to make a written decision. We've pretty much been ghosted and the seller refuses to sign a mutual release document and return the Earnest Money. Then today I hear from my agent that they want to sue us and keep the earnest money because we had wasted so much of their time. Bear in mind this is a property in Ohio, so earnest money is only $1000.

This is clearly a scare tactic right? What grounds do they have to keep the earnest money? And clearly it is not worth it to go to court for both of us over who gets to keep $1000. Really I should be suing because they aren't releasing my EMD when it clearly states that when sellers and buyers do not agree to the repairs needed to be made.

What can I do to protect myself? Can I get out of this contract with my EMD without a mutual release document signed?