I'm not a lawyer whatsoever, and this isn't legal advice - but if your contract clearly has a clause in it that states you can break the contract within 5 days of the inspection if the property is unacceptable, then you likely have a fighting chance of getting your earnest money back (although I suspect it will involve small claims court), and you likely won't be subjected to the worst case scenario as Russell described. 

Even if the market doesn't fall, the chances of RE prices going up in the coming year is low so the risk is just the opportunity lost in the coming few months. 

If they have been there that long, chances are that they consider it their home and will care for it as such, as you already mentioned it's in good shape now.

I still think now is the best time to keep mailing, especially if you've been at it a while, but it's hard to look at the monthly fees for it to go out if the chance of returns and closings are limited.

I dont want to be caught in a bad position, but I also want to be ready to pick up any deal cash and I am willing to take the chance on using the HELOC if I can make the numbers work. 

Not one tenant agreed with me.Although I find it easier to address a problem "head on" I think most people are wired to avoid "conflict".It's not easy for most people to willingly place themselves in uncomfortable situations.The stress, due to lack of information, is mounting everyday, for both landlords and tenants.I do agree with a previous poster about the need to (find a way) to be equitable *when* working on a solution, even with so many variables in tenant's circumstances.Even tenants that aren't particularly fond of each other are having long, involved, daily conversations with each other over " the rent"Many of us volunteer at local pantries and have direct contact with the many, hard working, used to be middle class, families, that, through no direct fault of their own, are already homeless.Even if they are lucky?

When you buy your next "forever home," I'd try to find something with an exit strategy that would allow you to transition it to a rental on the off chance you end up moving again.

The newest BP and BP rookie real estate have been fantastic and gave a lot of food for thought on direction forward.Gave a chance to go over the budget and possibly even cut some things out.Try to keep building up those reserves and stack up what we can for when we do see a dip in real estate. 

We will need to have her relocate and there is a high chance she will lawyer up.

Even when real estate isn't doing what it's "supposed to be doing" as far a price is concerned, chances are the stock market side of things will "have your back" so to speak.