Short sale transactions are complex and challenging. Canceling a short sale at the last minute can be frustrating for any buyer, especially if the buyer is sick and committed. However, it can happen.
Buyers Can Cancel Short Sale Contracts
Often, it is not the seller who cancels the short sale contract, but the buyer. Generally, short sale agents do not care which buyer gets the house as long as the buyer is qualified and willing to wait through the short sale process.
Here are the reasons a buyer may cancel a short sale contract by withdrawing their offer:
- The buyer may find a home they like better or a home that can close quicker.
- The buyer may feel hesitant and anxious.
- The buyer may intend not to wait for short sale approval and may have submitted multiple offers on multiple homes, choosing the short sale that gets approved first.
Note: Some legal experts say that submitting multiple offers at the same time if the buyer is unable to purchase both homes violates contract law.
Sellers Who Cancel Short Sale Contracts
Although it is more common for the buyer to cancel the short sale contract, sellers may also have the right to cancel. Generally, sellers do not sign the purchase contract without stipulating that the contract is subject to bank approval of the short sale.
In California, buyer agents typically attach a “short sale addendum” to the purchase contract. The short sale addendum specifies that the entire transaction is contingent upon bank approval. Furthermore, banks have no obligation to approve the short sale.
My legal sources say that if the bank decides to accept a second offer from Buyer #2, the short sale agreement with Buyer #1 fails, and the transaction with Buyer #1 is terminated.
Here are ways a seller can cancel a short sale contract:
- The seller may decide to cancel the listing, and the listing agent will agree to that.
- A foreclosure action could occur that prevents the short sale.
- The seller may be able to accept a higher offer and cancel the initial offer.
How Buyers Can Prevent Sellers from Cancelling Short Sales
Although it is rare, sometimes sellers back out and change their minds about the sale. In this case, a buyer with a signed purchase contract should seek the advice of an attorney.
The best thing a buyer can do is read the short sale purchase contract and the short sale addendum if attached. The buyer may also want to speak with an attorney. Essentially, if the short sale addendum includes phrases that allow the seller to continue marketing the property and allows all offers to be submitted to the bank, the bank can accept an offer at any time that is higher than the first buyer’s offer.
Many buyers believe that the short sale addendum protects the earnest money deposit and allows them to begin inspecting the home after the short sale is approved, which is true, but they do not read the fine print.
The fine print often favors the seller. If the buyer finds such phrases unacceptable, the buyer may insist on removing the clause entirely from the short sale addendum. While it does not happen often that a seller kicks out a buyer with a contract in favor of a higher offer, it can happen in a short sale. Generally, the seller doesn’t care much about any buyer who closes the deposit account unless there is a tax consequence.
For more legal advice on short sales, please speak to a real estate attorney.
Was this page helpful?
Thank you
On your notes! Tell us why?
Sources:
California Association of Realtors. “Short Sale Addendum (C.A.R. Form SSA, Revised 4/12).”
Source: https://www.thebalancemoney.com/short-sale-cancel-contract-1799100
“`css
}@media screen and (max-width: 480px) {
.lwrp.link-whisper-related-posts{
}
.lwrp .lwrp-title{
}.lwrp .lwrp-description{
}
.lwrp .lwrp-list-multi-container{
flex-direction: column;
}
.lwrp .lwrp-list-multi-container ul.lwrp-list{
margin-top: 0px;
margin-bottom: 0px;
padding-top: 0px;
padding-bottom: 0px;
}
.lwrp .lwrp-list-double,
.lwrp .lwrp-list-triple{
width: 100%;
}
.lwrp .lwrp-list-row-container{
justify-content: initial;
flex-direction: column;
}
.lwrp .lwrp-list-row-container .lwrp-list-item{
width: 100%;
}
.lwrp .lwrp-list-item:not(.lwrp-no-posts-message-item){
“`
“`html
}
.lwrp .lwrp-list-item .lwrp-list-link .lwrp-list-link-title-text,
.lwrp .lwrp-list-item .lwrp-list-no-posts-message{
};
}
“`
Leave a Reply