In order to release earnest money, state law requires a signed release, a court order or mediation. This law protects the real estate agent from becoming embroiled in the dispute since the agent cannot choose sides and release the money. It is best practice to not make promises as to the disposition of the money since you do not know how the court will rule. Moreover, since you are not a licensed attorney please do not advise the client as to what legal action to take. You also may not represent the client as a lawyer or be their mouthpiece at court. You may only appear as a fact witness.
Referring the client to Paragraph 4D of the contract which maintains that wrongfully refusing to release earnest money may require them to pay the other party’s attorney fees and court costs often has a positive effect on resolution. It is far cheaper for the parties to negotiate a fair resolution than to go to court.
Lastly, do not confuse a builder’s non-refundable security deposit with earnest money. Depending on the terms of the contract, the security deposit is often earned at contract because the builder takes a detrimental change in position such as unique finish selections or prioritizing completion of one house over another. Therefore, builder security deposits may not be refundable or subject to the earnest money rules.