Hi Dct and thanks for your post.
As the others have already answered your question about terminating a short sale contract, let's focus a little on the actual process of approving a short sale. And here, I have some additional good news.
First, aside from just a small handful of lenders, the waiting time has improved greatly from 2009-2010 when offers sat at the negotiator's desk for 3 months minimum. Now, Bank of America and Wells Fargo (both of which use computer programs to submit short sale information) can both process offers in about 15-20 days, sometimes even faster. So you don't need to anticipate a lengthy waiting time for short sale approval from many of the larger banks.
What really matters, of course, is the NUMBER of loans that need to be negotiated. If there are two or more loans on the home, the chances of a quick short sale decrease drastically. Even if both loans are with the same bank, the second loan can cause a 1-2 week additional delay. In the case of loans on the same home with two different banks, the process can become even more problematic. Only your Realtor will know for sure what types of time lines or process will be involved in buying a home sold as a short sale.
So contact your Realtor and have him/her talk extensively with the listing agent about what types of time lines will be expected in approving the sale for the home and if there would be any anticipated delays for second or third loans that need to be negotiated in the sale. Good luck!