The seller can continue to market the home for back up offer purposes until a sale is consumated. If the buyer indicates a desire to cancel the contract, the seller can accept another offer "subject to the cancellation of the previous escrow". Once the original buyer and seller execute cancellation instructions, the deposit can be released back to buyer according to the terms of their cancellation instructions or the underlying agreement.
While the matter is still unresolved, i.e. either the buyer or the seller has not signed the cancellation instructions, a cloud on the clear title of the property exists, which is the reason there are penalties in a contract for non perfomance and failure to comply with cancellation instructions when they are valid. Some buyers feel that they can "tie up a property" by refusing to perform or sign cancellation agreements, and some sellers refuse to sign cancellation instructions releasing the due deposit back to the buyer - however, both would do so at their own peril and risk of damages.
If the seller is refusing to release your deposit, you may need to speak with an attorney. It may be wise to file a notice lien on the property so that the seller could not, for example, open an escrow elsewhere and consummate a sale without any public record stating there is a cloud on title should this continue.
Good luck - and talk with an attorney sooner than later -... more