Yes, if your contract has expired, the P&S should give you a closing date. If the closing didn't happen, then you no longer have a contract.. UNLESS.. you signed an extension to close that you may or may not remember?
If you don't want to buy the home and you are "out of contract", your agent should have you and your seller sign a deposit release. You should also consult an attorney if your earnest money isn't returned.

Lacking an automatic extension of your contract, you don't have a contract to walk away from. It died when you didn' t close, and if it didn't close because the seller could not perform, your earnest money is yours.

As the buyer if the sales agreement did not have a contingency for "ALL TIMELINES TO BEGIN WITH BANK APPROVAL" then you should be able to legally back out of the contract., hypothetically. And as always the seller and buyer will have to come to a mutual agreement over the earnest $$ deposited. Are you working with a realtor? As a buyer in Portland Oregon, using a realtor is free. I would seek legal counsel about your particular situation or contact a local realtor with short sale expertise to ask advice. Have a copy of your sales agreement and all addendums when you meet. Every state has differnet laws.

The answer could be yes or no depending on the language in your purchase and sales agreement. I would recommend speaking with an attorney to have them review the situation. I can recommend a few attorneys that would be able to help you out. They may even review the situation first and explain if they can help. Feel free to contact me so I can have you connect with them.

My only other question would be, do you have a buyer's agent? A buyer's agent should be able to advise you on the situation initially? If there is no buyer's agent representing you...then I would speak with an attorney.

You really need to speak to your attorney.