The question is, was it accepted and signed.? Although now, that he has modified his offer, it might be a mute point. The lender probably has standards that they must comply with. Keep in mind also that you are dealing with a very large bank, which has huge departments. FHA loans can be a bit more tricky, due to possible repair issue's and if your market area has a great deal of cash, the lender will always prefer cash. Some area's, like where I am in Florida have a shortage of good listings at the moment (lots of inventory in the pipeline though with foreclosures and short sales), so the Cash buyers and investors almost always are able to grab the good properties over a FHA buyer. In addition when I have listings that need a great deal of work, my lenders want CASH. They just don't want to get tied up due to repair issue's. This won't last forever though, but for right now the cash buyers win out. The lender has the right to accept or not accept a offer. Short Sales are subject to third party approval and that is the approval of the lender. I hope this explains it a bit for you.