This is a great post.
First, you need to talking with your REaltor and their broker ASAP. This is not uncommon, however you make some very good points. It very well may be that the home has declined in value. The question may be "how bad do you want it?".
Second, it is not uncommon with short sales to have timelines and deadlines disregarded by lenders. That's why you need advice from the professionals IN the transaction, not professionals from Trulia. They know the history, what the other aspects are of the sale.
I was just talking with my clients about a home that they had made an offer on two months ago. Countrywide finally got back to the buyers in front of them. Those buyers had to wait six months for a response, had to obtain new financing, and the appraisal came in at $525K. Countrywide won't sell for the appraised price, they want the higher price of the original offer made back in March. So the first buyers walked away, not the listing agent called me and asked me my buyers want to move forward.
I spoke with them yesterday and they said "We offered a low price in May, why would we offer more now. The value has dropped further. So the property will probably go into foreclosure.
You may have to way how much you like the home versus the true market value. Your REaltor should be the best person to advise you.
Get reassurance from your agent. He/she should be able to answer these questions for you. I would ask you to go back to the thought process of why you bought this property in the first place.
Hang in there.
The bank can take as long as they need even after the scheduled escrow closing date. The Short Sale Addendum you signed covers this situation. Just hang in there and ask your broker to contact the lender on a daily basis to see what else needs to be done.
The closing date written into the contract is a condition of the contract, the seller was obligated to close on or before that date. If a written request was not granted you don't have a contract. Also from my experience, you don't have a bank approval, if you did, they would be pushing for a closing date. Once approved the banks want to close asap.
Definitely consult an attorney!
Hang in there, if you did your homework before submitting an offer, you should be fine. These deals just take a long time to complete. Be patient!
How do I Cancel Escrow on a short sale property? You have to complete a Demand to Close Escrow then Cancellation of Contract. Your Realtor can do that for you.
Are we still obligated to purchase the house? would there be any legal implications if we don't?
You are not obligated to purchase the house. You can back out. You may potentially loose your deposit and have to pay escrow for the work they completed. If you really donâ€™t want the house anymore you may want to take a chance. Chances are you will be able to get your deposit back.
(eventhough it's the seller's bank fault that we did not close on time) are we actually out of contract ? No, you are not out of the contract. Buyerâ€™s normally sign a short sale addendum when submitting an offer on a short sale. The short sale addendum states the lender may amend close of escrow to approve short sale. This opens the door for them to extend the close date. The addendum also states that you are on the hook for any costs you incur whether the short sale goes through or not.
What about if the person (buyer) became incapacitated during escrow and can longer fullfill obligation? With the proper medical documentation you will be able to cancel the contract.
I think of any of those issue or similar came up, leverage might be on the buyers side... In that case, a lawyer would need to jump in...
The only time I have seen a seller/builder cancel is when they let their guard down and got emotional. I would not cancel your movers just yet...
Now is a great time to buy if you are looking at long term appreciation.