real estate agent dishonest

My parents had signed a contract to sell their house. The realtor showed the house and offered a contract. She told my parents that the buyer had been approved for financing. after weeks of neg a contract was agreed on and the realtor put a sold sign on the house. my parents found a home they wanted and offered a contract on it. they had several prospective buyers on their home but the house was unable to be shown because of the sold sign. when they told the realtor that they had offered a contract on a house she told them they should have waited until their buyer was approved. the next day the realtor called and said the buyer could not get financing and the contract was voided. do they have any legal grounds against the real estate co. the realtor and the buyer are friends and also work for the same company.

What I can't understand is why anyone would put up a "Sold" sign rather than a "Pending" sign.

Your sad story also shows why a lawyer can help when you buy and sell a home.

My guess is 10 to 1 you're out of luck. If you thought approval was important you should have put it in the contract. The broker will deny she mislead you, or claim you misunderstood ("I said they were preliminarily approved" or "it was my opinion they'd be approved"). But if you have proof, complain to the real estate licensing board and real estate trade assi\ociation and the better business bureau. And see a lawyer NOW to figure out if there is something you (or the lawyer) can do, like send a lawyer's letter.

#1 If a person is truly preapproved for a mortgage they usually come with a letter of conditonal qualification. This means that after checking a persons credit and employment history, debt to income ratio etc, etc. the bank deems them qualified enough to bother arranging financing for.This is only the first step. So if your folks Realtor, was truly working for them, than she should have checked on this.All Realtors should know enough to ask for proof that a person is able to purchase that home for the listing price, even if they negotiate for lower.
Was this lady acting a Sellers Agent or Dual Agent?
#2 I don't think your folks have any legal recourse, but they should lodge a complaint with this Realtors broker and their local Multiple Listing Board, also known sometimes as Association of Realtors.
#3 A Realtor should always look for backup offers on properties, because a sale is never over until a proper deed has been conveyed.

Your folks got an idiot for a Realtor.