Hello Dilbert and I'm so sorry to hear about this situation.
Unfortunately, there are no easy answers, and having just experienced an extremely, uncomfortably similar situation where I, too, represented the buyer and the seller was refusing to sell, I can tell you what the attorney told us:
1. The CAR contract calls for binding arbitration to settle matters arising from the contract. In this case, since the seller does not agree to sign the contract, a notice should be presented to the seller requesting mediation or arbitration. If you both initialed the "binding arbitration" area, then may need to defer to binding arbitration.
2. Failing a successful outcome in binding arbitration, you may have the option to sue the seller for specific performance and damages.
As far as having your agent talk with the seller directly, my advice would be NOT to do this, and it was rather ludicrous (in my opinion) that the other broker should recommend that your agent call the seller. Unfortunately, since all agents are considered "employees" of the broker, your agent's broker needs to be involved in this transaction starting now.
Finally, you may wish to consider--as offensive as these next words are going to be to you--possibly offering the seller some money to consummate and close this deal. There are two reasons that I am suggesting this: 1) any legal action, including arbitration, is going to cost you time and money, far more than a few thousand to make this situation go away; and 2) there is no law--according to the attorney--that can force a seller to sell or a buyer to buy, so if you really like this home (and it sounds as if you might) , digging in is likely to cause the deal to fall through and for you to lose this home and perhaps a really favorable interest loan rate.
By all means, talk with a real estate attorney on Monday, there are many excellent ones in Palo Alto and San Jose. In the meantime, your agent should be calling the CAR legal hotline for assistance as this may provide you with a faster list of possible options.
Grace Morioka, SRES, e-Pro
Area Pro Realty