I am so sorry this is happening to you, years ago now the same thing happened to me, we had offered 500k on a 3 bed house in Balham and the vendors REA phoned us on the day of exchange demanding an extra 50k. I can vividly remember it to this day including the coffee shop we were walking past on Battersea Rise when they called, funnily enough I was thinking about it only this morning.
To cut a long story short we didn't offer the extra 50K (stamp duty would have made it impossible for us) unfortunately this was just before house prices shot up
they sold about 2 years later for about 650 if I remember rightly (they had done a loft conversion in the interim)
however it was the start of a very bad time for us and the reason I was thinking about it this morning is I was thinking how shitty my kids home circumstances have been since with a succession of crappy rentals and run down properties in shabby areas which is all we can afford.
if I could change 1 thing in my life to improve it the biggest thing would be to buy that house.
FWIW they are now on the market for 1.3-1.5 million!
FWIW2 I need to remember that we would never have bought the house the vendors real name was a normal sounding 'Sue' but she insisted on everyone calling her Miranda because it sounded posher. They had been impossible from the start; she didn't tell people she was using a different name from her legal one so everything had to be redone, she used to call my solicitor screaming about papers then send a message via her lawyer that they were on her desk all the time. They declared weird things like they were taking all the light fittings and the toilet seat (it was a completely normal 50p B & Q job) when it was all over my solicitor said he'd suspected it would fall through from the start he said they had behaved like we were repossessing their council house the whole time (I think he was trying to cheer us up!)
The REA at the time was Jacksons (just looked them up and they are still trading) just read an email from that time they obviously managed to trade their way out of administration, sorted things with trading standards in Wandsworth & refunded all the rental deposits they had retained, maybe got rid of all the people who were no longer allowed to act as estate agents, maybe they even joined the ombudsman scheme instead of just displaying their logo
So Sue who wanted to be posh Miranda if you've found your way to Mumsnet you can enjoy the fact that your behaviour f*&^%d another family's life up!
My comment to the OP is will you find another house you can afford that is 'as good?' will you find one better? what is the opportunity cost of loosing this one?
I wish you well and good luck thank you for allowing me to get it off my chest