Great question! I suggest to get the preliminary HUD1 settlement statement that the negotiator is working with the bank on. Simply ask your agent to get it from the negotiator and have your agent/negotiator explain this HUD1 to you. Also, if your closing is in 5 days, you should have received the short sale approval letter a while ago.
In fact, you should have been asked to accept the approval letter terms.
In the short sale approval all costs are itemized (as to where they will appear on the final HUD1).
If something does not make sense, have a conference call with the negotiator and request an explanation of ALL COSTS. If you really love the property and you feel it is still a good deal, go ahead and buy. If you start re-negotiating now, the bank may reject your counter, or order a new bpo (broker price opinion)/appraisal which might come higher then before (prices are going up), so you'll end up pay same or more, but you'll wait for a while. Again. Plus, your escrow money could be at risk.
So, at this point, go ahead and ask what they (bank and negotiator) mean by "appraisal contingency fund" (each bank uses their own slang). Once you get the preliminary HUD1 and approval letter, talk to the title company, negotiator and your agent to clarify this issue. Math does not work here as 50% of 12K is not $3,500. Why are you not returned all 12K if the property appraised lower? Is it possible that the negotiator or the title company are getting paid a little more for their work from this "fund"...
If that's the case, you should have been asked if you are ok with that.
Hope this helps.
Irina Karan/Beachfront Realty, Inc. CDPE 305-904-2355 IrinaKaran@gmail.com