From the Ask the Broker files:
We submitted an offer on a short sale. The seller accepted the offer and we’ve been waiting on their lender to approve it for almost three weeks. We’re tired of waiting and want to withdraw our offer and find a “real” home for sale. Can we do that and get our earnest money deposit back?
My initial response to any communication I get like this is, “You need to talk to your agent”. I can’t interfere in an existing agency relationship, which unless you’re buying a home without any representation (what a horrific idea that would be) then you are working with an agent and you need to talk to them. That’s what they get paid for.
Even if I was allowed to advise someone in an agency relationship, doing so would not be prudent. You see, I have not seen your contract, and it’s that contract (and probably addendums) that will dictate your rights and ability to cancel.
An aside ”“ if you get impatient waiting on a lender response on a short sale after less than three weeks, then short sales probably aren’t for you. It can take months to get a lender response. Sometimes, they never respond.
What the “Typical” Arizona Short Sale Contract/Addendum Says
Here is, generally, what happens in Arizona. I stress generally as virtually anything can be written into a real estate sales contract and I stress Arizona as real estate law and practice can vary wildly by state. If you live elsewhere, what follows won’t apply to you (though your state may have something similar. Talk to your agent.)
When you write an offer on a short sale, and the seller accepts that offer, you are now “under contract” to purchase that home. The lender acceptance of that offer is a contingency that must be met for the sale to proceed to closing. (Many people seem to think, erroneously, there is no contract until the bank accepts the terms of the offer.) So in the case of this questioner, they aren’t trying to withdraw an offer, they are trying to cancel a contract.
Hopefully the Arizona Association of Realtors Short Sale Addendum to the Residential Resale Purchase Contract was included with the original offer. That addendum states on line 41:
Buyer may unilaterally cancel this Contract by notice to the Seller at any time before receipt of a short sale Agreement Notice from Seller.
The “Agreement Notice” is what is issued if the seller and their lender(s) enter into a short sale agreement.
In other words, a buyer can cancel a contract at any time before a lender approves a short sale. Typically, that would include returning to the buyer any earnest money that was deposited. The buyer would however, lose any monies already paid for things like inspections and appraisals (which is why you shouldn’t ever get those things done before lender approval of a short sale).
IF that is, the short sale addendum is properly incorporated into the purchase contract, and no other language was written into the contract that supersedes the boilerplate language in the addendum.
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