Hello again and thank you for your reply. Technically, under that language you would not be required to do anything other than cancel the contract, since your loan was not approved (at the offered price), and you would be entitled to a refund of your earnest money. That is because that contingency failed. There is no duty to give the other party an opportunity to lower the price. That said, if you have now made a new offer of the appraised price, then if you gave them a certain number of days to come back with an answer, you would have to wait until that time has run, to officially demand your earnest money back.
However, if you issued an offer with no time limit, you have the right to withdraw that offer any time before they accept. In that case, since the original contingency failed, you would be entitled to the return of your earnest money. It appears though that there may ultimately be a disagreement about this, if your Realtor is any indication. In that case, you may end up having to sue to get it back, since the escrow
company (or whoever is holding your earnest money, generally won't release it without agreement of the other party.)
Please let me know if you need any clarification. I would be glad to assist you further if I can.