Hi Rico. I understand your concerns about erosion. I am not sure if the neighbor's draining of the gutters is the only cause for the erosion or if there are other reasons. My thinking is that perhaps the erosion problem could be remedied by taking appropriate measures. Have you asked the seller to make repairs? I am not saying that you have to stay in the contract and ask for repairs first. I am just wondering if there are other avenues. You are saying that the seller will not let you out. There's a difference between the seller not signing the release of the deposit money and cancelation of the contract. The seller can't force you to buy the house. Once you cancel the contract, the only remaining question is what remedies the seller has and that depends on what your contract says. Many contracts contain liquidated damages clauses that limit the amount that a seller can recover in the event of the buyer's default. Most contracts also provide that the buyer may cancel the contract during the inspection period and it sounds like you canceled after you received the inspection report. Usually, deposits are not non-refundable, but since this is a new house, things may be different. Please understand that real estate agents cannot give legal advice. You should speak to your agent. I hope you had your own agent. Sometimes sellers don't sign the release right away because they are angry, but in most cases the sellers eventually do agree to return the deposit as long as you did not cancel the contract without good cause. Good luck.