A title company holding escrow cannot refuse to release your buyer’s deposit if the seller has agreed to release and cancel the contract, and under the terms of that contract it is clear that the buyer is entitled to retrieve it.
In real estate transactions, buyers are often expected to include an earnest money deposit with their purchase offer in order to affirm that they are serious about purchasing property. Once an offer is accepted and the purchase contract is signed, the money is deposited in escrow or held by a title company. If all goes well, the money is used for the down payment and closing costs of the sale. Should the deal fall through, however, the title company freezes the funds and then determines whether the buyer gets the earnest deposit back under the terms of the purchase agreement.
A buyer is able to rightfully back out of a sale if the seller fails to fulfill the terms of the purchase contract, be it an issue with the appraisal or due to a failed inspection. Additionally, the buyer may be unable to secure financing to finalize the sale which, unless otherwise stated in the contract, would also entitle them to a refund of the deposit.
Whatever the case, unless the buyer did not go through with the sale for a reason that was not explicitly written into the purchase contract, the buyer is entitled to get most (usually there is a cancellation fee), if not all of the earnest deposit back. If the title company is refusing to release your buyer’s funds, consult with a real estate attorney in order to take legal action and protect the interests of your buyer.