Sorry it didn't work out for you. I advise you steer clear of short sales and foreclosures if possible. They are covered in bureaucratic red tape and who knows what will happen with all the outstanding lawsuits against foreclosures in MA and where it leaves current owners of foreclosed properties.
Get yourself an exclusive buyers agent who can guide you through the process.
Usually in a short sale there is a period of time you allow the seller to obtain short sale approval. When that date expires you can back out of the deal and receive your deposit back.
It really depends on the wording in the purchase and sale.
Lynn911 Dallas Realtor & Consultant, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
Hopefully you aren't taking any other losses, like inspection or appraisal costs. In the future, there are a few other ways to limit your losses when dealing with short sales. A qualified attorney should be able to help you with the specifics.
In Ca., if a buyer makes an offer and a seller accepts the offer you have a contract. That is true for short sales and other sales. The difficulty with short sales is the short sale lender approval contingency. In other words, the transaction cannot be finalized unless the short sale lender approves it.
It appears that approval was not granted within the period written into your offer. I would think that you could cancel the transaction and get your deposit back but there is no way that I can know for sure since I do not know what your contact says.
Your agent and/or attorney do have that information. What advice have you gotten from those who are your advisors?
Hope this helps,