Terminated Contract but Earnest Money is TIED Up... WHAT???

It's interesting to see how this is done in other states. It's a very different process in NYC- with no earnest money or commitment during the due diligence process/time period. Once the buyer has had the opportunity to do their due diligence- only then do they put up a deposit (typically 10% Down payment) along with contract signing. Once in contract, it's not easy to back out of a deal without losing at least some of that deposit- which is all handled by attorney's. Typically, the valid reasons for backing out of a deal are either going to relate to a financing contingency or co-op board rejection of the buyer. Sometimes a special assessment announced after contract signing could be a valid reason for backing out without a penalty- but that is a messier issue. 

Dana, it is different in Colorado too, if a buyer terminates, the Holder (usually the title company) must refund within one week, as long as the buyer terminated within dates.