Without knowing the specific circumstances of your transaction nor what's been agreed upon in the contract, I've answered your questions in general terms. Best to address all of your specific concerns directly with your agent..
First off, most likely you are not "bound" to sell to this buyer. If you are past your contractual timeframe agreements for close of escrow and/or loan contingencies, and have not agreed to any form of extension, you are within your rights to issue a "Notice to Perform" to the buyer, giving the buyer a specific number of days to complete the deal (typically 3 days). After which, the buyer must either close the deal or forfeit it. In this case, you would most likely be entitled to keep the buyer's deposit (this of course would depend upon the specific agreements in your transaction).
For the deal to truly be "null and void", it is up to you and your agent to officially end it (it is not automatic), and it needs to be done in writing with the buyer--which is what the above stated "Notice to Perform" process would accomplish.
In this market, many loans and lenders need 45 days to close. It is unfortunate that your buyer's lender was unable to meet the agreed upon terms, but sadly, this is hardly a rare occurence. Strong agent/lender relationships are imperative to deliver the best service. If my referred lenders don't deliver the results I need for my buyers, they are no longer on my team. It's that simple.
Conversely, as a listing agent, this is exactly why it is important to have a proven lender (or 3!) ready and able to jump in and resuscitate the deal if the buyer's lender cannot deliver as promised. If nothing else, the second opinion will give needed insight into whether the deal is even capable of closing any time soon! Close relationships with capable lenders are critical for having an effective team behind the sale of your home. Your agent likely knows someone that can help with this, and should be your first call.
If the buyer can indeed close in the additional 2 weeks they've mentioned, it is most likely in your best interest to see it through. Going back on the market as a "TFT" (real estate term for, transaction fell through"), is not the strongest position to be in as a seller. So in most cases (if the deal is otherwise a good one), it's in your best interest to make it work with your current buyer if possible.
Best wishes to you in your sale!
Jeff and Lana Strickland, RealtorsÂ®
Intero Real Estate Services, Los Gatos