The entire short sale transaction is 'subject to" the lender's approval. If the bank levies terms on the sellers that they don't want to comply with, they can walk.
I had this situation about a year ago. I represented the seller, and the bank would only approve a short sale if the seller contributed $35,000 to the table. Both teachers my sellers simply did not have that kind of money...our deal crashed and they foreclosed.
Yup - short sales are tricky buysiness!
Seller shall reasonably cooperate with existing Short Sale Lenders in the short sale process, but neither Seller nor Buyer is obligated to change the terms of their Agreement to satisfy Short Sale Lendersâ€™ consent or term sheet(s).
If the short sale approval was received during the time frame specified in the Short Sale Addendum that should have been part of the offer and the terms of the short sale approval did not require the seller to bring in cash, then you have a valid contract. Otherwise the verbiage that Shannon quoted applies.
However if the seller will not perform and sign the escrow papers the transaction cannot proceed and by the time you go through legal action the property will probably be foreclosed on.
Good luck. Hopefully your Realtor will be able to solve this problem for you.
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Technically they could, but I don't see how it would be in their interest to do so. They would most likely be in violation of the contract as well. If you think this is a real possibility and you are going to suffer damages, I would contact a real estate attorney.
I hope you are being represented by an agent as well!
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Keller Williams Realty