CA Buyer in Default Refusing to Release Earnest Money

[James Haig Streeter]

I recently sold my CA home, with the initial accepted offer being 7% over asking, with all contingencies removed from the outset. After paying the standard 3% earnest money into Escrow the buyer then cancelled the contract and demanded the deposit back. This is even though the California Purchase Agreement has a liquidated damages clause that states if the buyer defaults the seller “shall retain the deposit”. The buyer also signed a contingency release which has similar language.

I finally sold to a backup offer, for asking price – therefore a 7% loss compared to the initial offer. As this home is located in the SF Bay Area this represents quite a substantial sum.

Question: As the buyer who was in default is refusing to sign the release of the earnest money, are there any next steps I can take to compel them to sign? I understand that often this situation ends with an agreement for each party to take a 50/50 split. Any other options that anyone can suggest, keeping in mind this is a CA contract?