The RPA-CA (California Association of Realtors Residential Purchase Agreement) generally allows you to back out of a short sale deal, provided you didn’t sign any addenda with the seller or his bank. Under the RPA-CA, you get to keep your contingencies—meaning you can cancel the contract as you please—unless you remove them through another agreement, such as a contingency removal or cancellation form.
What Happens To Your Deposit?

If you’ve already made an earnest money deposit, backing out under regular terms will allow you to get it back. It’s only a matter of the short sale seller giving you a refund. As long as the contingencies haven’t been removed, the state’s Notice to Perform and Cancellation forms assures that buyers don’t lose anything in the process.

Why Back Out?

One of the most common reasons to back out of a short sale is title problems. If this is the case, remember that title burdens, such as unpaid homeowner’s association dues, are usually paid and cleared at closing. At this time, the lender usually lets the escrow company settle any fees due and pay other lien holders, if there are any. The short sale will only close once all liens have been cleared from the home. For any other reasons, such as the home’s physical condition, it’s likely that the short sale seller will try to negotiate repair costs before letting you cancel.

When Should You Back Out?

Backing out of a short sale is pretty simple, but it can complicate things in the long run and should still be avoided. Before making any deals, make sure to get a good look at the home, from the physical condition to the circumstances surrounding the mortgage and default. A good short sale agent can help you find useful information on any short sale home, such as how many lenders there are and why the seller wants to get rid of it. If you do decide to back out, ask yourself why and consider alternatives before giving it up."