Michael Crook, Home Buyer in 22202

Can I withdraw a contract on a short sale when the bank hasn't accepted my offer and how long will it take?

Asked by Michael Crook, 22202 Tue May 12, 2009

I made an offer on a short sale in Herndon in February. I now want to move on and forget this short sale. I would like to just find a traditional sale. Is it possible to withdraw my offer without losing the earnest money since the bank never accepted my offer? Also, how long should the withdrawal process take from the time I submit it? I truly appreciate your time and assistance.

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doloresarmstrong57’s answer
I am the homeowner and not in danger of a foreclosure. I've never been late or missed a mortgage payment. I signed a contract two days ago with a local realtor to do a short sale. Can I change my mind and withdraw the contract ? I have not stopped my mortgage payment as the realtor told me to.
0 votes Thank Flag Link Thu Mar 28, 2013
First of all, when the seller signs the offer, you DO have a ratified contract, albeit with a contingency for approval by the lender. Contrary to popular opinion, your contract is with the seller, not with the lender. The seller still owns the property and is responsible for accepting an offer, with a contingency for lender approval if he is not in a financial position to come to the table and close at the contracted sale price.

This is a contingency just like a home inspection contingency, appraisal contingency, etc. The short sale contingency addendum which most agents use spells out the terms you have negotiated; for example, it may say that earnest money will not be deposited until the lender has approved the deal, that the home inspection and appraisal will be done within a certain timeframe AFTER lender approval. The terms vary depending on the buyer, of course, and these are just examples.

Typically, there is the following (or similar) language: Seller must provide Purchaser with written evidence of lender's approval by (a certain date). If you don't receive evidence of lender approval by that date, you provide notice to the seller you are withdrawing the offer. This is the language you need to reference in your contract in order to answer your question. Hope this helps and good luck,
5 votes Thank Flag Link Fri May 21, 2010
Yes cindy but it didn't stop you from commenting which means you still got credit on Trulia's Activity for it just as if you had answered it!
1 vote Thank Flag Link Fri Mar 2, 2012
I love it when an question posted in 2009 pops up again with new answers in 2011. I would suspect that Michael has long since moved on and dealt with his concerns.
1 vote Thank Flag Link Fri Jun 24, 2011
I am a Short Sale Specialist and can tell you that you really should wait the time. Since there are so many short sales the banks are overwhelmed and taking forever to respond. It is usually worth your time if you made a legitimate offer to just stick it out. It truly depends on who the bank is that the mortgage is with. If it is Bank of America it takes months. Other banks are faster but still take a while. Check to see if the listing agent has sent an entire short sale package along with the offer to the bank back when you originally made the offer and it was ratified with the seller. Also make sure they are staying on top of the bank as well to ensure nothing slips through the cracks. I have one that just got approval from Chase and Chase is taking over $100,000 loss. They accepted an offer that is $80,000 below market. I make all buyers put no less than 1% in escrow and sign an addendum that they are willing to wait at least 5 months for an approval. By the way the one that was just approved was given to Chase on January 5, 2010. It is A LOT of time and effort spent to get a short sale approved. Good luck.
1 vote Thank Flag Link Tue Jun 1, 2010
The only one that can answer your question is your agent. Your agent will have all of the facts and figures. Happy Memorial Day!
1 vote Thank Flag Link Mon May 31, 2010
This is a 2 tiered answer really. You contractually have a ratified contract when the Seller signs the offer and it is accepted. However it is contingent on the bank accepting the offer. Until it accepted by the bank and fully accepted it is ussually easy to rescind your offer.
Without knowing the exact wording in the contract; however, I suggest asking your agents Broker.

I am sure by know you have had this answered and been able to get the home you desire.
Butch Novak
0 votes Thank Flag Link Fri Mar 9, 2012
Short sales can take time or in some cases seems forever! I can understand your frustrations and wanting to purchase a resale home.

Please look at your contract date of expiration. If you don't renew your offer you can get out of the contract and receive your earnest money deposit. You must have your notice to the seller in writing to withdraw this offer. Are you working with a Real Estate Professional? He or she will guide you through this process. If you are not, I will be happy to help you.

I am a Buyers Specialist and work with The Spears & Associates Real Estate Team at Keller Williams of The Treasure Coast. Please contact me if I can help you find your home in my area.
0 votes Thank Flag Link Thu Mar 8, 2012
To give the devil his due, this showed up on the first page of Trulia's answer more questions today, and I didn't even think to review the date it was asked assuming it was a recent question. I get notified by email on questions through Trulia, and lately, I have been getting rental questions, so I hit the answer more questions button. This question was 5th on the list today. Perhaps they are recycled based on the date of answers, not the date the question was asked, but I agree, Michael Crook is probably answered by now!
Michael, if you are out there, what happened?
Best to all, Jim
0 votes Thank Flag Link Wed Mar 7, 2012
Many state forms have included a short sale addendum which gets attached to a short sale offer. It basically says that until the seller has come to terms with the bank and accepts the SS proposal, they can get out of the contract. Some of these states put into the SS Addendum that the buyer can get out until the seller has accepted terms from the bank. It is good language to have or to put in. 2nd, recognizing that the contract timelines do not start until bank approval can prevent the buyer from submitting earnest money until bank acceptance.
0 votes Thank Flag Link Tue Mar 6, 2012
As long as you used the SSA you should have no problem gettting your deposit back as your inspection and appraisal contingencies are probably still in tact. Short Sales aren't all that bad you just need an agent to filter through the crap and find the good ones.
0 votes Thank Flag Link Tue Jan 3, 2012
Yes! You have the right to withdraw the contract; a short sale contract is not ratified until the bank accepts.
A short sale is like buying a house from 2 persons, the seller and the bank and both parties of to agree and sign to make the contract ratified, until that happened you are free to walk, your agent should provide a letter sign by you to the bank requesting your withdrawal then a release of obligation and release of deposit follow.
How-ever first talk to your agent, to see if that your best option.
Another way out is, considering that only 30% to 50% of short sale are approved, and the ones that were approved most of them were counter offered until the buyer and the bank came to a final number, In that case if you were to sit and wait and if you receive a counter offer from the bank, then that could be your way out if you don't accept.
0 votes Thank Flag Link Mon Jan 2, 2012
Wait it out, and see what the bank says
0 votes Thank Flag Link Sun Jan 1, 2012

You probably found that you could move on and get your earnest money back in a reasonable period of time. I hope you did find the home of your dreams. All the best and Happy New Year to all the agents here.

Robert McGuire ASR
Your Castle Real Estate
1776 S. Jackson St. #412
Denver CO 80210
0 votes Thank Flag Link Sat Dec 31, 2011
In New Jersey we use a short sale addendum and YES you can withdraw at any point prior to completion of Attorney Review without losing your deposit. This is of course assuming you did not sign any other type of binding contract that addresses this directly. Good Luck ~ Tara
0 votes Thank Flag Link Sat Dec 31, 2011
It depends on the state contract. Go back to your agent he has the answers.
0 votes Thank Flag Link Fri Dec 30, 2011
Michael, Absolutely you may terminate a short sale offer anytime during the period you're waiting for a final response. You have no contract and your earnest money is not at risk. You should immediately contact your Realtor (hopefully you were using a buyer broker and not the listing agent) and tell them you wish to formally terminate the offer and receive your earnest money deposit back.

If you receive any push back at all (and you shouldn't) then simply ask to speak to the Broker in Charge and tell them you want to terminate and demand the return of your earnest money.

The entire process should only take a few days and whomever is holding your earnest money should refund it to you within a few days of having received the written termination notice.

You've learned something many Trulia readers would be wise to consider, Short Sales easily take 2-6 months or more. just to get a response. The response is "NO" more than 50% of the time and it could be because of the price but most often it's because the Seller doesn't qualify for a short sale. There are many motivated Sellers who will be much easier to deal with and if you're renting, "time is money"

I wish you good luck and a healthy, happy and exciting 2012.
0 votes Thank Flag Link Thu Dec 29, 2011
Hi Michael,

I would advise you to review your purchase contract with your agent. The contract, as well as the short sale addendum, contains clauses as to time frames and your rights under the contract. If you are still within your right under the time frames you may be able to cancel the contract without any penalty. I do not know what the short sale addendum contains in your state, but here in California it is pretty pro-buyer.

I would also tell you to try and wait it out. Short sales often command lower prices than traditional sales, and since you have waited a bit already it may be worth your while to stick it out if you still love the home. Speak with your agent about possibilities.

Best of luck,

Rachel LaMar, J.D.
LaMar Real Estate, Inc.
0 votes Thank Flag Link Fri Jun 24, 2011
Yes...in New York, anyway. We did withdraw because the bank took too long to respond, and my buyer lost patience and withdrew.
0 votes Thank Flag Link Fri Jun 24, 2011
Your contract is with the seller and the seller will be the party to determine if you are still obligated. Your offer should have had a deadline in writing in regards to the timeframe that was acceptable to you to receive an offer response from the third party.
0 votes Thank Flag Link Thu Jun 23, 2011
Depends on what is on your purchase contract in your state and if you signed a short sale addendum, which you should have. I know the answer here in AZ is YES. I try and suggest to clients to exhaust all inventory, minus the short sales first as it can take a bank 6 months to get back to us. Some listen, some don't and usually after about 2 weeks of checking in every day, they cancel. Here is some good advice, look at listings that fit the buyer's (YOUR) criteria, and that would and should include properties listed at a price the seller will actually accept. That is the thing about short sales, simply but I think it gets overlooked: They are listed at a price NO ONE knows if the bank will accept. Honestly, here in Tucson, there are so many REO and inventory, that I have no problem(s) getting clients what they are looking for, avoiding short sales when we can. That said, I have two on the waiting pattern waiting on the banks. Best of luck!
0 votes Thank Flag Link Wed Jun 22, 2011
The answer is 'Yes'. Your contract contains a clause with a closing date. If you are beyond that date, you can withdraw your offer without losing the earnest money. Contact your agent and or attorney depending on what state you are in. Good luck, I'm sure you will find your dream home.
0 votes Thank Flag Link Wed Jun 22, 2011
Dear Michael,

Review your contract and your short sale addendum. This addendum will say how long of a time period you entered when you made your offer and received an executed contract.

Susan Penn, PA, SFR, CDPE
EWm Realtor
0 votes Thank Flag Link Tue Jun 21, 2011
Yes. If a bank hasn't responded you can withdraw if you have put a date of response and they haven't not responded.
0 votes Thank Flag Link Tue Jun 21, 2011
The short answer is Yes. Your agent shoudl be able to help you do that. If s/he can not, cantact the sales manager.
0 votes Thank Flag Link Mon Jun 13, 2011
Hi Michael,

Alot depends upon how you wrote up the contract. More than likely if you are at a point that your ready to move on the contract is expired. With short sale offers there is typically a clause that the bank has to respond within a certain amount of time.

There are definitely alot of people in your shoes and giving up on trying to acquire a short sale, as it seems they rarely close. Statistics say they're getting better but still far from steady.

0 votes Thank Flag Link Wed Jun 16, 2010
You definitely can do that. Talk to your agent and get it done soon, so you can move on. I am sorry that, this happens to you. But you are not alone!
0 votes Thank Flag Link Mon Jun 14, 2010
If is is contingent upon teh seller bank approval and you do not have approval, you can put it in writing to withdraw and sign a release of escrow form to get your deposit back. Unfortanately this is one of teh realities of short sales that they can take a long time.

I wrote a great blog that can help people interested in short sales.

0 votes Thank Flag Link Mon Jun 14, 2010
You always have to option to withdraw any purchase contract, but there could be issues you have to deal with and items you might have to pay for later. You should have some idea by your contract how long you have to wait before the contract is out of contract. I would talk with your realtor, if you have one or see an attorney.
0 votes Thank Flag Link Sun Jun 13, 2010
I'm sure that you weren't the only buyer to make an offer on the short sale. I would have my agent prepare a release and send to the seller and their agent as soon as possible.
0 votes Thank Flag Link Sun Jun 13, 2010
Hi Michael:

Amazing how a link continues over a year.

I understand on May 13, a day after asking your question you further clarified.

Yes, I am sure you can back out based on all the facts in the questions and further clarifications provided by you.

Michael, maybe you can now let us know, how did it go.
Did you successfully by another, how are the values doing and are you happy?

Web Reference: http://www.ruthandperry.com
0 votes Thank Flag Link Sat Jun 12, 2010
You should really discuss this with your agent because technically you do have a binding contract with the seller, which at this point is the current homeowner in default, not the bank. The seller has to release you from obligation, not the bank. Most of the time this should not be a problem, and I would'nt have even got an eanest deposit from you until we had an acceptance from the bank. Consult your current agent.
0 votes Thank Flag Link Sat Jun 12, 2010
Isnt it great to continue a question from over 1 year ago.

Michael can you advise what is the status, did you finally buy a home.

Web Reference: http://www.ruthandperry.com
0 votes Thank Flag Link Fri Jun 11, 2010
Check with your agent first, but in almost all cases it is not an issue to withdraw your offer prior to the bank approval of the offer. View the following website for more information http://www.TCRShortsale.com
Web Reference: http://www.TCRShortsale.com
0 votes Thank Flag Link Fri Jun 11, 2010
In California we have the contingency in place so that you can withdraw your offer and you should get your money back. It all depends on how you right the contract. If you have the right to cancel in your state, my suggestion would be to stay in contract until you find a home that meets your needs and is not a short sale. If your area is like ours, there are very few homes that are not Short Sales and the bank owned and standard sales are mostly being purchased by investors so the likely hood of you being able to purchase a standard sale are fare between.

Diana 909-560-0145
Web Reference: http://www.dianam.com
0 votes Thank Flag Link Thu Jun 10, 2010
contract should have an exp.date on it
0 votes Thank Flag Link Wed Jun 9, 2010
You can withdraw you offer unitl the bank accepts, and even then you should have contigencies written in the contract that will allow you to resind your offer and cancel if you do not agree with an item presented... besure you have appraisal and physical contigencies on your contract...

ps. you should never deposit our earnest money unitl you have bank approval on your contract... there should never have been an escrow opened until that bank approval was received... get better councel on the next offer you submit...
0 votes Thank Flag Link Tue Jun 8, 2010
Yes you can withdraw your offer until the moment the lender accepts your offer. It is not unusual for Short Sales to take even 6-8 months in some cases to accept or reject your offer.
Robin Ricker
Century 21 Flag
0 votes Thank Flag Link Thu Jun 3, 2010
I don't know the real estate laws in your area, but in California if you made an offer and the seller (the lender) did not accept that offer and there is no counter offer or the time to respond to the counter is over, then you are done. Request your earnest deposit check back and move on.
One thing to remember: The homeowner doesn't really own the home outright until the mortgage/loan is paid off. Until then the lender/mortgage company owns the home by way of a Deed of Trust or whatever method they use in your State.
0 votes Thank Flag Link Mon May 31, 2010
What are the dates on your contract?
I would check your contract and if the dates have past on any of your contingencies you would not be in contract.
Also, if the seller has not signed the P and S you don't even have a contract. Sometimes the bank will ask for all offers without being signed by the seller. Check with your agent. He/she will be able to tell you.
0 votes Thank Flag Link Sun May 30, 2010
I just had a short sale buyer, thru his attorney, ask for a credit from seller before we have approval by bank, after inspection and engineer's report indicates structural needs. Seller, thru his attorney, says no way to request of $20,0000 on offer of 260K. I recommended that any request for credit come after bank approves offer and based on engineer's report. Otherwise seller and/or bank will reject offer in a flash. After all this effort, not taking my advice squirrels the deal. Lesson: listen to your agent as a buyer. Happy Mem Day weekend.
0 votes Thank Flag Link Sat May 29, 2010
Hi Michael,

I just had a buyer back out today. We had a clause in the addendum to the contract that allowed us to walk after 45 days if we didn't have Bank approval. Although my buyers loved the property, we moved on to a house down the street.

Best of Luck!!! -Pat
0 votes Thank Flag Link Sat May 29, 2010
Dear Michael,

The answer you are looking for should be in your short sale addendum and with your realtor.

Good Luck!
0 votes Thank Flag Link Fri May 28, 2010
You need to confirm with your attorney. The attorney's I work with generally attach an addendum in the atty review period stating if the contract does not have 3rd party approval within 120 days this contract is null & void and the earnest money shall be returned to the buyer.
Web Reference: http://northshoreREO.com
0 votes Thank Flag Link Thu May 27, 2010
Great Question!

If you've been waiting since February, I definitely see why you want to back out of this!

You should definitely be entitled to your earnest money deposit back as long as the contract was contingent upon a short sale, which it should be!

For Foreclosures (or bank owned) even in multiple offer scenarious, they often require the earnest money deposit upfront but in short sales, the norm is becoming upon acceptance by lender.

good luck on finding your perfect home!
0 votes Thank Flag Link Tue May 25, 2010
If the contract was contingent on the banks approval, you should be able to withdraw the offer immediately. Your agent or your agents broker should be able to assist you easily in the process. Good luck.
0 votes Thank Flag Link Sun May 23, 2010
I agree with Terrance that, in future, you should not put up your earnest money or even order an appriasal until you know it's a go. And, to the extent you can, confirm that the listing agent is knowledgeable and experienced with short sales.
0 votes Thank Flag Link Sat May 22, 2010
Just ask for your check back. It was never deposited. If you like cannot have satisfaction by asking, stop payment on the check thru your bank in case you have a cagey broker/agent who wants to keep it and hope you use it on another deal. I handed two checks back this week. If the check was dated, it may be too old to cash by now anyway and would bounce if broker tried to deposit.
0 votes Thank Flag Link Fri May 21, 2010
While I do not have access to the standard forms of Virginia and I am not a Broker in Virginia if I read your post correctly your broker did give you sound advice. The short sale packages of most lending institutions require that they sign off on the ofer after the seller accepts the offer. There is a catch to the proceedure which is why most short sales take so long.
After the first leinholder signs off, the second one has to sign off, then the third and so on. The problem lies in the fact that in a short sale sombody may not get paid because there just isn't enough money to go around. From what I read about your experience and response to the answers so far it appears that there is more here than meets the eye. My advice to you at this point would be to speak to a lawyer to find out exactly what your options are. There are earnest money concerns etc that need to be answered and quite frankly I am not qualified to answer what may become legal questions.
0 votes Thank Flag Link Thu May 20, 2010
Good Morning Michael,

As Vicky pointed out below all contracts differ slightly from state to state and I agree that those of us who do not live in VA really do not have a sound understanding of their contracts.
In saying that, I think it would be wise if you and your agent had a meeting with the Broker of his company and sat down and discussed the situation, that way you will both be on the same page and there will be an oppurtunity for you and the agent to gain some knowledge as to what needs to be done.
You can also speak to your legal advisor to make sure you will not be in breach of your contract.
0 votes Thank Flag Link Thu Jul 9, 2009
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