Of course, there is a difference between being unable to perform and being unwilling to perform.
Is it possible that the seller wants to cancel because the seller thinks that a higher price is waiting?
This is what it could happen to the seller if he decided not to sale at the last stage, the buyers or their attorney, would write a letter to you explaining the legal consequences of not closing on the agreed upon sale. If seller still don't budge, the attorney may file a "specific performance" law suit against you, possibly with a "lis pendens" against the title, which will not only keep you from selling his house to another buyers, it will keep you from refinance it.
Best of Luck,
Have your agent and your agent's broker get as much information from the seller as possible. Only an attorney can give legal advice but the broker and agent can provide some help deciding whether to look for an attorney.
Your question shows up in "Home Selling in San Mateo" but you are shown as being in Simi Valley. There are differences between northern and southern California.
San Mateo real estate statistics at http://julianalee.com/san-mateo/san-mateo-statistics.htm
Top 2 agent nationwide at Keller Williams Realty, the nations largest
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Over 1,000 homes sold in Santa Clara and San Mateo Counties
As the others have stated, talk with a real estate attorney, but prior to doing that, talk with your agent and their Broker to try and get some free advice before you start chasing your money.
Judges are generally not inclined to force people to sell their property, but you could presumably have damages that they might award.
I would have your agent talk with the other agent to try and figure out what's really going on first and go from there.
Understand that you have signed a CONTRACT, and all that that entails.
A CONTRACT is sort of like the painted lines on the highway; it keeps you between the lines.
It tells you what you can do, and what you can't do.
And it is fodder for Lawyers.
The best adice I can give you, (and this is not legal advice) is to communicate; maybe even sitting down with all parties, and talking about the situation.
Surely, you can hit a compromise.