Seller wants to back out...

So I was in the middle of writing up a post on "at what point do you consider backing out of a deal because you've cashed out stocks for a down payment and then the market crashes..." But then I receive a call from my very stunned real estate agent. The seller wants to back out after about 6 weeks because they misunderstood the offering price...

For background, I found a deal for a SFH with an illegal ADU that was also being illegally rented in the back. I saw it as a great opportunity to househack based on my local laws. The owner's asking price was about $440k. We submitted an offer of $360k with all the nominal contingencies and a few modifications. First, a 2 week inspection period, provide $5k of earnest money, and an additional contingency that the tenants had to vacate the property by closing or make a $20k concession.

This initial offer was rejected by the seller as there was a competing offer. Both me and my agent sort of expected that, but I told my real estate agent to keep an eye on that property and resubmit the same offer if given the opportunity. This same exact house went up for sale last summer and went under contract. That same week it went under contract, a citation appears in the county records about the illegal ADU. At that same time, the house was taken off-market and not sold.

Flashforward to this year, and the competing offer backs out stating that the "Kitchen cabinets were too high". The seller's agent reaches out and asks if we are still interested. We resubmit the same offer and we go under contract.

During inspections we find about $25k worth of work that would need to be done and propose that to the buyer. They conceded $10k. In total, inspection costs were around $2k. The numbers for househacking still work as we gave ourselves a lot of margin. We still want to pursue the deal and allowed the inspection contingency window to lapse. 

Firmly committed to the deal, I liquidate a number of stocks to fund the %30 down payment and hold the funds in a savings account. As I negotiate with lenders during a falling market, that's when I get the call from my very stunned real estate agent. The seller's agent is just now realizing the agreed upon sale price is $360k and not $460k. The seller intends to cancel the deal and not perform the agreed upon contract. 

Albeit funny and a little baffling, I feel bad but a lot of people have been working really hard to ensure this deal goes through. 

What actions should I be prepared to take?