Your purchase agreement has a loan contingency. If the buyer fails to secure a loan for any reason after the contingency period expires the seller does retain the right to keep the buyer's deposit.
Why was your loan denied? Did you secure a preapproval prior to enetering nto the purchase agreement?
Perhaps you can try and secure a loan with anothe rlender and keep the deal alive.
Best of Luck to you
Kawain Payne, Realtor
Your best bet is to plead with the seller and or have your agent plead on your behalf. In this market, they may already have another buyer ready to go into escrow. In that case they may be willing to release your funds to you just to move on.
That said, the importance of having your loan and funds in place prior to starting to search for a property cannot be stressed enough.
Please speak to a qualified loan officer. Ask them how many purchases they have completed? Also, when did they complete the transactions? Today is a much different market than it was two years ago...and so on...
Because some loan officers are familiar with refinancing, but have no clue how a purchase works. They should ask you for loan conditions [pay stub's, W2's, bank statements, etc...] prior giving you a loan approval letter.
If you don't have a loan officer to work with. Any Realtor you are working should have several on their contact list.
It all depends how far into the transaction are you. Did your Short Sale Lender approved the short sale already?
If your Short Sale Lender has approved your seller's Short Sale and you are passed your time frame indicated in your contract for your loan contingency, then the seller is right. I am hoping you can reason with the seller.
Please talk with your agent and have her/him sit down with you and read the contract for more detail and possible legal remedies.
Best of Luck
If the property is located in NY, to us New York is an attorney state (for loans) that means that if you are doing a loan in NY an attorney will be in the loan transaction.
You must read your loan documents to see where in that documents it states that the attorney will keep portion of the money or call New York BAR and explain your issue.
I can tell you that the atorney did the right thing (based on signed documents), it is very hard for an attorney to lose his license over $5000 (read your documents, get counseling from the NY BAR).
Why was there an attorney involved? Was the Attorney negotiating the short sale or if the purchase was in NY, they use attorneys to close sales there. If the attorney was negotiating the short sale, did you sign something that the attorney gets paid for their services no matter whether it closes or not?
Good luck, I hope this helps,
I would seek legal council.