Question: After signing the purchase contract for the short sale of our home, the closing was scheduled thirty days after approval of the short sale by our lender. The lender approved our short sale with one requirement, namely, that the closing occur within fourteen days. The buyer was concerned, however, about qualifying for a new loan within fourteen days and cancelled the purchase contract. Did the buyer have the right to cancel the purchase contract?
Answer: Yes. The buyer can generally cancel a short sale contract without any reason at any time prior to the receipt of the approval of the short sale contract by the seller’s lender. If there is any condition in the approval received from the seller’s lender, however, such as a shorter closing date or a higher purchase price, the buyer can cancel the short sale contract at that time.
Note: All purchase contracts have contingencies such as home inspection, termite inspection, approval of title report, and the approval of the buyer’s lender for a new loan. A short sale contract simply has one additional contingency, namely, approval of the seller’s lender.
