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Cancelling a Short Sale offer

Hi,

We made an offer on a short sale property in IL with the contingency that we could rescind the offer prior to the third party (Bank) approval.There are no addendums over-riding this clause. Upon the advice of our agent, we kept looking for other properties as the short sale might take a long time to come through. As expected, we ended up liking another property that is not a short sale and our offer on the second property (contingent upon cancellation of the previous property's offer)  was accepted and we gave our cancellation notice to the seller of the short-sale property (the bank hasn't approved our offer on the short-sale property yet). The seller of the short-sale property got upset and is now refusing to sign the cancellation of the contract, can he do that? Are we within our rights as buyers to buy the new place? What complications could arise from this and what actions can we take to remedy this?
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May 13 2012 - US
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Answers (5)

Best Answer
Yes, you can rescind. Simple as that, there is no written approval from the bank which, in your case, is the only real approval that is considered legal.

After they accept or counter an agreement, they often 1st will negotiate with sellers to come to terms with them as well.. so your situation in the short sale would have been depending on both factors before acceptance by the bank. Your offer as well as the negotiated terms with sellers.

So the sellers can't do nothing.. even if they don't sign off on it. you have no legal binding contract. The bank could counter your offer f.e. as well.
If you don't accept that.. you are free to walk anyhow.

You hopefully also had an inspection as part of your offer.. again.. you can walk away with that one as well.. even if the inspection turned out just fine. I know that for you this won't be an issue, but just for someone else who might be reading this.. ;0)

You have no legal worries at all and are well within your rights. Sorry for the sellers and their agent. Either way.. you have nothing to worry about.

Your agent did a great job. You did everything in a correct legal way and will have documentation to back that up.

I doubt though you will hear much more of this, simply since you did things the right way and there is no legal case possible because of that.
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May 13 2012
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Thanks Jeanine, Dena and Jim! We appreciate your replies. Jeanine - Thanks for taking time to give an elaborate answer. We loved it.

Venkat
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May 14 2012
In Alabama (each state has differant guidlines) the seller has the right to refuse to sign a release in which case the earnest money held is really all thats in dispute. Those money will decided by the courts and filed into interpleading. You have withdrawn your offer, plain and simple the earnest money being held is a differant issue. Check with your agent as to how those moneys will be decided. Best of luck! 
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May 13 2012
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Thanks Jim, Appreciate your prompt response!
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May 13 2012

The seller of the short sale property does not have the right to fully accept a contract.  That offer/contract is contingent on bank approval, which you have not received yet.  There should be no issue for you going forward, but consult with your realtor on proper paperwork.

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May 13 2012
 
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