Expired Short Sale Contract: My Options?

After being in ‘approval limbo’ 2.5 months, my short sale contract expires tomorrow. This morning I submitted a letter notifying my realtor (also seller’s agent) I will request the refund of my earnest money upon expiration.

He requested a contract extension of July 30th, which “based on conversation with the lender” he’s certain will close by July 30th.
Here I should stress that this is an investment property on which my daughter would be co-buyer and would have gotten the fed tax credit. It’s a *cash*offer w/ inspection contingency only. She starts college in August and was to live here. With time growing short, last week we began apt/dorm/roomate search and are prepared to commit. The condo needs work so a delayed closing would 1) not allow sufficient repair time before the semester begins, and 2) she’d no longer get the fed tax credit. Congress was working on an extension but it’s unlikely at this point, and if she doesn’t live in the home she can’t get the credit.

Naturally our interest in the condo has changed, but still a good investment and potentially our daughter could move in next year. However, I don’t want to extend the offer another 30 days, and there would have to be consideration/negotiation due to the loss of the tax credit.

Assuming all is going as the realtor claims and “the lender’s ordering another bpo (appraisal) for the negotiator to obtain a final decision for approval”, how realistic would it be to direct the realtor to let the offer expire and instruct the seller/investor to make me an offer if they want to sell the place?

Is it conceivable that if I let the contract expire and tell the realtor
OK maybe I wasn’t clear the offer will expire. What are the odds the Seller/Bank will approach ME if I don’t extend / commit to another deadline to perform? IF they’ve been ‘actively working the file’ and it’s at the 3rd level/investor now – would they be motivated to try to win me back as a cash buyer, or go back to square one?

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