My wife and I sold my deceased parent's home via land contract nearly 2 years ago. We drove by today and saw a "for sale by owner" sign in the yard.
We stopped to inquire and found renters, not the original buyer.
I know they cannot sell the property, but can they sell their land contract? Do they have the right to rent without us knowing or approving? Is this default?

Depends on the terms of the contract. I'm assuming that the terms of the contract have not been completed but payments have been made on time. If the contract does not require that the must live in the house and doesn't prohibit sublets, it might not be in default. You need to read the contract carefully.

But clearly they cannot legally sell since they do not have title.