I KNOW!!! I feel you pain. It becomes very frustrating to deal with this process, isn't it?? If your purchase is in MN, you may have signed a Short Sale Contingency Addendum as part of your purchase agreement. If so, it clearly states in there that if you should decide to walk away prior to the bank approval, you will receive your earnest money back, no harm, no foul.
What does your agent say?? Your agent should be able to advise you about these delicate matters. It's also important to make sure your expectations are realistic about how short sales go. Depending on the seller's lender, they can take a REALLY long time. I always advise buyers who are purchasing short sales to make their peace with the fact that it's going to be tough to hang in there.
As a short sale negotiator, I find that the number one reason for short sales falling apart is buyers losing patience. Understand what you are feeling is normal - buying a house is an emotionally charged process and sitting around waiting for up to six months of longer for an answer and/or a closing can take the wind out of your sails.
I would encourage you to think back to why you fell in love with the house in the first place and the great deal you are getting. Before you pull the plug, understand that given enough time nearly all short sales will come to closing - so if you stick with it, you should be able to get some resolution.
In the end the choice is yours, but there are three options for buyer's in this market:
-Pay fair market value or above for a traditional sale with a seller with equity.
-Prepare to wait 3-6 months on a short sale but make a fantastic deal the seller couldn't otherwise afford.
-Deal with bureaucracy of a bank and possibly get a deal if you meet their terms.
I find that good bad or otherwise that most people are deal seekers in this marketplace so they fall into the latter of the two categories but want to work with traditional sellers. The moral of the story is that to get the good deals you need to deal with the baggage that comes along with it.
Before you pull the plug, have your agent check with the listing agent to see where things are at. You might be closer than you think.
Coldwell Banker Burnet
Check your paperwork to see if you signed a short sale contingency agreement. And of course, check with your agent. While there shouldn't be a problem with canceling the purchase agreement (as the contingency of bank approval has not yet been met) the short sale contingency agreement makes it a cleaner separation.
Alina is correct; it will depend on the language in your contract. You may have a time limit for the lender to reply which if you don't meet, you risk losing your earnest money. You may have a "get out any time before approval" clause, but until your contract is reviewed we can't know for sure. Have you asked your agent?
How long have you been waiting? Most short sales take 3-6 months and 9-12 hasn't been uncommon. My longest short sale was 18 months.
Assuming you are able to leave at anytime, consider watching the market for a home you like better. I've advised several buyers to do this and while it makes more work for me, once all is done they know they are in the right house. Good luck.