Both parties in a contract has to behave in good faith. If one party want to back out of contract for other reasons, but uses walk-through as an excuse, the party is not behaving in good faith, and should be held to contract terms.
In most real estate purchase contract, the deposit serves as liquidaed damage in case buyer walks out. This is a contract clause, and walk out and leaving the deposit is still following the contract. This is why I suggest the simplest way for LZ to walk away is to forfeit deposit.
Of course he could choose to make this more complicated.
