When can a "short sale" escrow be cancelled by the seller?

Question

I have been in escrow for two weeks on a "short sale" home. My real estate agent informed me the bank taking the loss will not allow the closing costs agreed upon in the sales contract. I refused to cover these costs and am now being asked to sign a form to cancel escrow. Is this legal?

Answer 1

In a short sale the bank hold’s all the cards; Looks like the bank has stated its lowest amount total, if it’s a good deal maybe you should think about paying closing if not the only alternative is to walk away,

Remember in a short the seller has no power to close the deal only the lender

Answer 2

Yes, it is legal.  You entered into a contract to purchase, and the lender will not approve the terms which were agreed upon.  Either the buyer, the seller, or both need to mediate the costs involved, or the deal 'goes south'

Answer 3

Without knowing which state you live in and without offering legal advice, I will lean towards saying Yes.

The bank essentially countered your offer.

You refused the counter instead of countering again.

So unless you want to counter again and negotiate the closing costs, sign the release form in order to retrieve your escrow monies.

Answer 4

When a deal is not going to happen you cancel the contract by signing a contract release form.  I assume a cancel escrow form is the same thing for wherever you are (but you'd better check it).  Anyhow, if the deal isn't going to happen then this is the normal procedure for canceling the deal.  Its not really a question of legality - you can refuse to sign it but since the deal is dead why refuse, just cancel it and get your deposit back and move on.

Also, since the bank refuses to allow the deal and their approval is required for a short sale, they do have the right to say the closing costs are not allowed (since the money was pretty much coming from their pocket), so they don't exactly have the right to cancel the deal but they have the right to say they won't pay per the agreement you and the seller had which effectively means you and the seller have to come up with the extra money or the deal is canceled.