Seller trying to keep EMD, financing fell through.

[Mohammed Islam]

I was under contract for a property, and the financing fell through due to the property not meeting the lenders requirements and not being sufficient.

The seller is trying to keep the EMD as I have signed and requested the mutual release. The agreement is contingent upon the buyer securing financing which I was not able to do and have provided a denial letter.

The seller is requesting money for damages because the appraisal came in at the purchase price but needed a heat installed in the kitchen which the seller agreed to install (Not in writing). The seller is also claiming that the 2nd unit tenants have vacated as that was part of the agreement and he will lose money. 

Seller is OK with going to court. What are my options? Who’s in the right here?