You can cancel and not be penalized because 1. Third party bookings are not allowed and 2. You are using Instant Book, so you are allowed up to three cancellations per year on Instant Booked bookings. Before cancelling, however, call Airbnb and discuss the situation with a customer support representative. They may cancel it on their end for you. Be sure to keep all communications with your guest in the Airbnb message thread so the Airbnb support representative can see what has transpired between you and the guest. Always remain polite, professional and clear in your communications. The Instant Book has been a good option for us, as it has increased our bookings, but there are some downsides. Fortunately Airbnb allows more flexibility to allow a host to cancel with out penalty because of this.
Here's the Airbnb number to call:
Greece +30 211 1989888
United States and Canada +1-415-800-5959 or +1-855-424-7262 (toll-free)