Who is responsible ?

I submitted a short sale offer to the 1st lender 6 months ago. Finally the 1st lender approve my offer.
Now I am getting cold feet because I did not anticipate them taking
6 month for approval and the market is going down further.
My concern is who is going to pay for 18 month of R.E. taxes and 12 month of HOA.
The lender stated on their approval letter that they wanted no less then the contact amount. So who is responsible? I want this deal free and clear at closing. Will I be responsible for the lender taking so long and all the fees involve?

That is a very typical situation with short sales in this market. Obviously, the short sale as approved by the lender is no longer a good deal for you (with all the arrears in taxes and lower value). I would simply withdraw the original offer and resubmit one that is favorable to you.

Your offer should take care of all tax arrears, hoa dues, negotiation fees and payoffs to 2nd - all coming out of 1st lender’s proceeds from the short sale. If they insist on the contract amount, then you should move on to the next property and let the lender eat it in foreclosure. Remember, it’s their fault they took so long to approve, but they want YOU to pay for their mistakes. In this buyer’s market, you have the power, not the lender. Go and find a better deal elsewhere.

Can I assume that the lender will pay all arrears to date?
Is that the norm? I am going to do all my comps again but I just want to be sure.

When I calculate the net sheet on a short sale, I always put the tax and HOA arrears on the 1st lender. Of course, you still can’t assume anything these days. It really all depends on how much the arrears are. If it’s the deal breaker and you as a buyer can make it fit your numbers, I don’t see anything wrong with paying part or all of the arrears. Again, the bottom line is it still has to be a good deal for you.