There are two "Contracts" here; the Contract between you and the Seller, and the Contract within the Escrow:
What I want to address is the Escrow; The Title Company will not do ANYTHING unilaterally; meaning they will not cancel the Escrow based on the Seller's request, you have to agree. They will keep the Escrow open if you do not say so.
So, if the Seller tries to sell the house to someone else, there will be an Open Escrow pending.
In the other extreme; the Title Company will bill you for your expenses. They will bill the Seller for theirs.
Befriend the Officer at the Title Company and ask them to call you if something happens. (do not try to give them a gift or anything; not kosher!)
Good luck and may God bless
Those are the only circumstances allowing the seller to cancel.
The only one who can opt out is you. You have a 17 (unless altered) day free look at the house while you do your inspections to see if that property is suitable. The seller has no opt out clauses unless you don't perform on something (it is too soon for that to be the case). Seller will provide you with a notice of cancellation. On that notice there is a box where it is checked that all money should be returned to buyer.
The question should be do wish to release the seller from the contract? If yes just sign the Cancellation Notice and have the funds returned to you. Your agent will walk you through. I hope it is not same agent who has the home for sale.
Not to disagree with you, Lou, but in every price range under about $700k, in South O.C. we are in a DEEP seller's market, where the listing agents call virtually ALL the shots. There are no buyer's agents in their right mind, presenting offers that they would like to get accepted, asking for buyer's choice for title OR escrow.
It doesn't mean beans what the state law is - in my humble opinion it has had ZERO effect on transactions in this area.
Tip next time around: choose your own services (title/escrow). New california laws say that the buyer is able to choose his/her own services and seller may not discriminate you based on your choice. Choose an escrow that is quick, efficient, trustworthy, and on your side =)
What cost do you have? Inspections? Perhaps the seller can be made to understand their responsibility for your costs if they have defaulted on the contract. Small claims court may be more appropriate than an attorney.
On the other hand, an attorney may be able to point out other areas in which you have been damaged by the sellerâ€™s action.
The good news is that hopefully there might not have been any charges incurred, as it sounds as though the seller may not have even turned in their signed escrow instructions. Escrow is supposed to wait until receiving all signed instructions, prior to starting to spend money.
Also, most escrow firms do not charge much - if anything - for a cancellation fee, this early in the process. Good luck getting it resolved.
Best of luck with everything! Come back and let us know how it turns out.