Rather that speak to the what if's of a legal battle, there is a practical side to all of this. A legal battle or a battle over earnest money as liquidated damages, is an expensive undertaking. Just because you win, does not mean you will pay dearly for that victory. There is no way of knowing that a judge would grant you legal fees as part of your "victory." Also the buyer may not really have any assets to lose. Then you would have a judgement not worth the paper its printed on.
I would suggest that the best way to deal with this unfortunate situation would be to see if you can get this willing buyer to purchase your home. I understand your frustration and the real costs of doing this, but I think the alternatives are much less attractive and more expensive.
One of the big lessons learned is that in NM a deal is not really closed until you receive your check. Does that make future plans very difficult to make? Yes it does. The financing landscape is a treacherous one these days and it takes experience and finese to really understand it.
We never like to hear about these situations, and hope that in two weeks the buyer's loan will come through and at least stop your financial bleeding.
I feel very bad for you. If you didn't use a Realtor then this is an example of why you should have. You should go to an attorney for advice; I doubt there's much you can do but I am not an attorney, so this is just my opinion. If you did use a Realtor then talk with him/her and/or the firm's Qualifying Broker to understand what your options are and to get advice.
This is not legal advice. For legal advice see an attorney.
In most cases purchase contracts are written to favor the buyers. The buyers normally have a set time period to secure financing (called the contingency period), inspect the property, etc.
If the buyers did not remove the loan contingency, it is doubtful that you could prove damages....that you turned down another offer because you were dealing with them.
If a Realtor was handling your transaction, my assumption is that the MLS status of the listing was BackUp Offers, or Contingent taking back ups, so the property was still being actively marketed until the buyers remove all contingencies.
I would focus more on talking with your Realtor.
1. Review the offer paperwork and see where they were in the process when they canceled
2. Discuss you problem with your Realtor. You can even show them this post. As a listing agent it is possible, in the final counter before acceptance, to REQUIRE that the buyers Co apply with a lender known to either you or your Realtor. It is does not obligate them to use the lender, but it gives you some control over the process.
3. Depending upon your market conditions, you can also impose a per diem fee for every day late that they transaction closes (once contingencies have been removed).
I would also review all properties with whom you are competing since putting your home on the market and see how many have either lowered prices or sold.
If you were doing this on your own, without a legal contract and without a title company or attorney holding the earnest money, then I'm afraid you may be out of luck unless you can have a friendly conversation with the buyers and have them agree to give you something. Good luck with that!!!