If the seller accepted another offer before yours was submitted, they basically are stuck. As long as the buyer fufils all their contingency obligations, in the state of California it’s very difficult for the seller to cancel after an offer is accepted.
If the seller knows they have a better offer and WANTS to make the buyer walk they can certainly do everything they can to make the buyer walk. Sort of like being a jerk to try to make your girlfriend break up with you rather than dumping her. The seller could refuse any and all repairs, be generally unhelpful in the entire escrow process, etc. It’s not totally ethical, but I’m sure it happens. Of course, if the original buyer walks during the escrow process there’s no guarantee that better offer will still be there a week or two later.
Although there is a big price gap there, offers are not always apples to apples. If that 690,000 was half cash it’s more attractive than an offer contingent on your home sale.
I’m not sure what the legal obligation is for the selling agent.
