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EMD- Can They Keep It?

Tl;dr- EMD is said to be kept by seller if buyer defaults. Contract says we can withdraw at any time during contingency. We did after they refused to bargain after significant issues came up during inspection. We sent a release and thus I think withdrew. Days later, they gave an okay counter offer, but we were done. Now they are trying to keep EMD. Can they?

Just wanted to double check- I got some good info on learning how to proceed to go to court from a previous post, but I want to make sure I'm not misunderstanding the contract. Our contract is pretty normal I think, the EMD goes to them in case of default, but the contract spells out that in contingency we can pretty much bail after inspection for any reason.

Inspection was terrible, but we didn't immediately bail, we tried to make an offer that I think was more than fair. Maybe we felt pressure, and didn't realize how much it would be to get into, and we had no time to figure out just exactly how much money and effort it would be other than quite a bit. They refused to budge on price at all anyway, and said the many expensive issues the inspector turned up weren't issues, and the seller claimed to have expertise as well (though his claim wasn't true in our state actually.) Multiple inspectors were clear on the issues, and they would have been over 10% of the price of the property, and needed pretty immediate fixes. We had to pass. We sent a release. They didn't sign yet, but we did. The contract said we could opt out at any time during contingency, which we were in.

Two days later, they changed their minds and said they would bargain and give us most of what we wanted, but with a weird addendum that actually quite affected us, and we said no. It wasn't cold feet, there was just so much wrong, and we had already moved on, and they didn't give us all of it anyway, and we didn't want to keep battling over every little thing. Really though, it was all the stuff wrong, and we didn't feel obligated to come back to the table, and we had frankly moved on mentally etc.

Contract simply says they can keep it if we default. It also says we can let them know we are out at any time during contingency though. Do they have any grounds at all to try to keep it?

EDIT- Just in case it matters, contingency period was less than 2 weeks. The seller has complained about that a lot but I'm seeing things on here that are months. So idk if it matters, but in case it does....

submitted by /u/midnightunicorny
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source https://www.reddit.com/r/RealEstate/comments/1edc29y/emd_can_they_keep_it/
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