I would write up a cancellation of contract and release of escrow and have the buyer sign it.  I would then send it over to the seller or sellers agent if there is one.

In the old days I was involved in many escrow disputes because I held escow...I never lost one for my buyer because I always told the seller the hard facts and did not mince words:

If seller does not sign by certain DATE, I will be forced to interplead the dispute with the courts...the looser pays all the legal fees and court costs. In addition, I get to charge a fee for my trouble. 

If the buyer is really pissed, they can also file court papers to tie up the property so that the seller cannot sell it...untill this matter is settled.  So the seller will either loose and have to pay legal fees or they might win...a miniscule balance that will be peanuts after everyone takes their cut. 

Sellers all have a mistaken idea of what happens and think that if they play hardball, they will get to keep all the money.  The key is to not let them even  dream about spending your buyers money...

Eve

Follow the order as outlined in your purchase agreement.  It sounds as if you might need the assistance of your broker for reinforcement.  

Paging Counselor Brian L. Sirota, Esq.  (it's gonna cost you, LOL)

You're in CA, where's yer broker to help you with this?

I can't speak for CA although our Contracts are very similar. 

BUT in my great state of AZ, our inspection period = earnest money is soft. A Buyer's Inspection Notice with the box checked 'election to cancel' is sent out to escrow and the parties. OUR RPC gives escrow sole and absolute discretion in that event and there would be no need or ability on Seller's part to DO anything. . .

One last thing . . . seller doesn't need to perform so no notice to that effect would be in order. 

But seriously . . . talk to your broker and get their instructions.

You have some great advice here. As a reminder to the seller, the home cannot be returned to ACTIVE in the MLS unless there is a ratified cancellation by the parties to the contract.  Seems counter-productive on the seller's part.

I see we're both Californians.  I assume you've done the Cancellation of Contract form?  Escrow cannot release the funds without seller approval and the form helps, but it's really the escrow instructions that matter.  They will not be able to close the escrow file without determining the release of the funds and will not be able to sell it again until they do.

You could try arbitration and mediation, or remind them that they won't be able to sell until the funds are handled.  It may take getting another acceptable offer to move them along if that's the case.

Michael Jacobs has the best suggestion for you.

Can't answer as I'm not familiar with your contract.

In Georgia during the due diligence period a contract can be canceled unilaterally by a buyer. 

I'm not in your state and can't speak to your Contract but, I would reach out to your broker and a real estate attorney if the broker is unsuccessful in resolving this issue.

Good luck, Larry!

If that is the process in your state, then it would be the thing to do, talk to your broker too if unsure.

Wasn't there a inspection contingency Larry Barrett 

Follow the 4 corners of the Real Estate Purchase Contract. Until the last deadline is passed, Earnest Money is released back to the Buyer here. Where does it say in the paperwork that the seller makes that decision?

It's has been spelled out here so no need for me to add onto it.

Larry,

If the money is in escrow, escrow has to follow the purchase agreement, like Michael Jacobs said.  Talk to your broker.  

You you did not remove contingencies, and looks like you did not, the buyer can cancel based on the results of the inspection. Yes, of course, Cancellation form, Notice and/or instructions for escrow to cancel. 

p.s. I'd start with a conversation with a listing agent. There is no reason to keep your client as a hostage and loose the opportunity to sell hopefully before Christmas.

I see that you have advice from a fellow California agent.  Your broker should be involved at this point..

  Let us know how this turns out

Talk to your broker and follow the contract terms and dates. I wonder if the seller understands the implications of what they are doing as far as being able to now sell the house. See what Ryan Huggins - Thousand Oaks, CA said.

Check your agreement and/or speak to an attorney. How is it that the seller has control of the escrow? By definition, it is in a "neutral" account.

What are the rights and obligations of the contract?  That is where I would start.

If you do not know the answer to your question, seek advice from your broker.

If you are a broker and do not know the answer, I hope you are not overseeing any agents.

Yes, an attorney of the buyer should do it.

I can not speak to CA law, but the seller is starting down the wrong path in Md.   

Seller does not have any rights in that situation. 

If the buyer is within the time frame - there should be NO issue at all. I'd highlight the portion of the contract and deliver it to the seller. Florida contracts have it spelled out clearly.

The buyer has X number of days to complete an inspection and X number of days to rescind the contract based on the results of the inspection. 

I'd agree with Michael Jacobs - and have your broker or attorney get involved.

That is a question for your managing broker. If this was my sale. I would have filled out the proper release, have buyer sign it and send to the listing agent within the time frame. If the seller refuses to sign it, I would have my firms legal guru send a stern letter. If they still refused then a letter transferring to clerk of courts for a hearing

Eve Alexander has generally outlined the possibilities available. State law may vary a bit.

In my State, we have a clause just for that.  Sellers are basically forced to sign

I do not know what state you are in ... the contract "should" have provisions for the actions you need to take on behalf of your buyer. 

Yes with a little letter explaining lien rights potential, damages & att-fees

Well in IL we have attorneys to do this but possibly the other agent can give you insight into the sellers ridiculousness.

Here, once the buyers attorney calls it void, nothing much seller can do about it. If I was the sellers agent, I might pitch a fit if it was ridiculous stuff like a crooked switch plate in the garage. 

I do not know what the rules/laws are in your state to get escrow money returned. I'm sure it's outlined in the contract. Speak with your broker in charge.

Hmmm, Agents should advise sellers to accept only contingency free offers. That way a buyer cannot hold the property hostage and create a LOSS for the owner. After all, agents like to preach about DOM.

Agents for the buyer get to advise things will happen fast when you submit a contengency free offer. That means you need a REAL commitment for funds and professionals you can trust.

Do the inspection. Get the appraisal. Reveiw the insurance history  and if satisfied. write the offer.

You know, sell it exactly the same way banks sell their stolen real estate. That also means no disclosure avaialbe.

Cancellation notice if you are within dates.

This may differ in each state, here in CO, buyer can subjectively terminate at inspection, no questions.

No idea! NCdoesn't work like that!

glad that's not an issue in my state

Best is offer incentive. 5K toward NCRR to close the deal in 10 days...etc