I put a deposit on a foreclosed house in Massachusetts,we signed the p and s agreement and got the money to close on the house.The bank didn't want to get a clean title for the house because it was tied to another house they tried to sell later.So they canceled selling us the house and they put the house back on the market with the other house together.They did not give our deposit back before they put it back on the market.We put a bid in for both of the houses and they did not accept our offer.Our original was done in written and needed proof of where the money was coming from and the other offer for both house was done verbally.We did not get our deposit back yet.. They did send a deposit release form after they did not accept our offer on both houses.I did not sign it because it states that we both agree that the purchase and sale agreement has become null and void without further recourse to either party.They had the right to pull out of the sale at any time according to the p and s agreement but did they break any laws with the way they did it and not giving our deposit back?

Offer and acceptance, you made a offer, which required a payment ( to be legal) they never accepted the offer so here was no contract and no agreement. The form they sent was just standard paperwork and not required, since there was never an agreement to a sale.
** The agreement on real estate has to be in writing.

So yes, the minute the formally refuse your offer, they may offer it for sale and accept another offer.

In fact it is not uncommon in a bidding situation, for a seller to have several offers with money attached on their desk at one time.

Had they agreed and signed back your offer, it would be different. At that point they could only cancel due to one of the terms of the agreement.