It sounds like the Short Sale was not approved by the short sale lender. As a result, you should be able to get all of your money back except for anything the Escrow Company may have spent at your instruction.
Best of luck,
Broker / Owner & Certified HAFA Specialist
Thom Colby Properties
Newport Beach, CA
Moving Lives Forward (TM)
We NEVER DOUBLE-END Transactions in our Brokerage. IN MY OPINION, there is NO benefit to the Seller or Buyer and, only benefits the Agent. Also, NEVER use your RE Agent / Broker as your Lender or vice versa. Also, be careful when using Real Estate Broker-owned Escrow and Title Companies - they can be loads of trouble. Our recommendation is to use companies that are all independent of each other.
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The ONLY reason an agent asks/demands that you open escrow with only the sellers "acceptance" is because that/those agents are attempting to attach you to the property. They know that it is difficult to withdraw your money from an opened escrow - and that the seller has to approve for you to get your money out of escrow - not an easy undertaking. The ONLY persons who benefit from such a tactic are the agents - PERIOD!
Having said that, as part of opening escrow, and/or even just getting the seller's "acceptance" there should be a CAR ( State of California DRE.) Short Sale Addendum, as part of the transaction, which spells out that the escrow/transaction is strictly CONTINGENT upon the final approval by the lender, of your offer, OR, your approval of their counter-offer - which apparently you are reluctant to provide.
As you have a contingency, this SHOULD be an out for you - a loop-hole - designed to allow you to extract yourself from the transaction/escrow without jeopardizing ANY of your deposit.
To re-emphasize. No buyer should open an escrow/put money into an escrow BEFORE receiving final approval from the lender. The ONLY things that can result for a buyer in such a case are ALL bad for them.
You can back out and get your money back.
Like someone else stated, as a buyer, I would never put money into escrow nor would I spend a dime until I have written approval from the foreclosing bank on the terms I agreed to.
In the web references, I placed a blog I wrote on how to buy a short sale.
Actually, if your transaction is based on the CAR forms and includeds a Short Sale Addendum, you are not really in contract, because you do not have bank approval on the agreement you and the seller reached. It is not a fully ratified contract, so you can decline to sign the bank's counter offer and there are no seller signatures required to release your deposit. You sort of enetered a pre-escow deposit. And I take a different position than my trustworthy colleague and neighbor Bob Phillips - I always suggest my buyers deposit a small amount into escrow if the short sale seller and their agent require it - it holds your position, as you are in now, where you are the only buyer the bank is dealing with - and if you really want the house and can reach an agreement on the purchase price, then you are good to go. The other thing I would do it check the comparable sales - regardless of what you and the seller agreed to - you should evaluate their response on the recent sales of comparable homes. Homes that have actually closed in the last 3 months.
Hope that helps.
Leslie Eskildsen, Realtor
As seen in the Orange County Register: http://www.ocregister.com/articles/buyer-281304-escrow-check.html
DP2 is right. As long as you reject the counter, you're fine. In a short sale transaction, you submit an offer to the seller of the property. They in turn often counter (as in your case) then send your offer to the bank for approval. It sounds like after a 6 month process, the bank has finally come around to countering and it was not to your liking. If this is the case, you can back out now and get your escrow deposit back, you can counter back, or accept the bank's counter. Those are your three possible options.
Why does the bank counter back like this? Well...the property could have been listed significantly below market value (seller and listing agent set the asking price, but it is an IMAGINARY value because it in turn has to be approved by the lender(s)). Ask your REALTOR to discuss the three options above. Good luck!
Always good to review the details of the contract with your agent. Short sale addendum should have been used and this document indicates how the offer is to proceed based on lender's approval/acceptance etc. Review that document closely. Most buyer's agents are submitting a short sale addendum with the offer and this document, item F (Calif Contract) "If Short Sale Lenders' written consent or term sheet(s) provided to Seller require changes to the agreement in order to satisfy the terms of 1B (approval), (i) neither Buyer nor Seller shall be obligated to continue..."
The obligation to purchase is stated in the purchase agreement and/or short sale addendum.