If the loss mitigation department accepts your offer, then they have to notify the foreclosure department to stop proceedings. We have actually been caught in a situation where the shortage was zero, so the foreclosure department did NOT stop.
You can attend the foreclosure auction with cashier's check in hand to buy it from the bank's trustee on the first Tuesday each month. The bank will bid the amount owed on the loan. If you bid higher, it's yours, but you have to pay right then and there at the courthouse. Usually, it is better to let the bank take it, and then they will offer it again later through a Realtor. You will have time then to do inspections and get a mortgage loan of your own, which you won't if you buy at the courthouse steps.
The bottom line is that the bank decides (sometimes strangely) and they can supersede a pending contract for sale by foreclosing the property. If your earnest money is being held at a title company, you will get a refund fairly easily.
Not all sellers qualify for a Short Sale, this is not something the banks have to give, it is something the banks have guidelines for.
If this seller does qualify and the sellers agent did not take the proper steps to begin the short sale all may not be lost. The sellers Broker or your agent may be able to assist. First they need to find out if the seller qualifies, if so and the discussion with the bank begins, the forclosure process can be stopped if you are in Title.
I am afraid that this seller did not qualify or why else try a quick sale, unless the selling agent did not know how to handle a Short Sale.
We have a Short Sale Addendum that states you can't change your mind but the Lender can. So if you had an agreement from lender they can still change their mine. They seldom do but can.
I hope you can still get your house, It may be a matter of a couple of thousand more in interest and the seller may want to pay that to save his/her credit.
I hope you have a seasoned agent that assisting you in the process there are many tips and tricks for foreclosures, pre-foreclosures, short sales in order to secure the winning bid for the buyer. I have been a listing agent and buyers agent on short sales
You will have to be dealing directly w/ the listing agent if still in the short-sale listed period. Banks do take a LONG time to get back to you on short sale offers (that's why I think they should be called "LONG SALES")
The only other way to work it out if it is going to foreclosure is meet up at the county steps on auction day and try to pick it up there..(however.. you will need a cashier's check handy.. not sure if you were up for paying cash or not)
The last resort is to always wait it out and keep a deadly watch on that property, so that as soon as the bank lists the house as an REO; your Realtor is already submitting an offer immediately!
Hoep that helps