Earnest Money Disagreement - Help Needed!

[David Plaunt]

Hello all - Help / Advise Needed -

In May of 2021 I entered into a purchase agreement for a duplex with 1 unit vacant. After we signed the agreement, the Seller filled the vacant unit with a tenant who was not background/credit checked and a boyfriend who was not on the new lease and also not background/credit checked. I know, Red Flag City, but we tried to make a deal work and offered many different options to get both tenants on our lease. Seller would not budge and became extremely argumentative and aggressive towards us. 

Due to this change in the conditions of the property we asked for a cancellation (with earnest money returned to buyer) and did not go to closing. Seller refused to offer cancellation, claims he deserved to keep our earnest money, and threatened legal action. 

We did not close. No legal action was taken on either side. Our broker suggested we wait and the problem should resolve itself. He said Seller is supposedly not able to sell until this is resolved. 

Seller re-listed with a different brokerage and recently sold. Our earnest money has not been returned. It's currently with Edina Realty Trust. 

Has anybody ever seen this before?? What actions can I take to get the earnest money returned?? Help!!