Legal Question in Real Estate Law in California

I can't give you conclusive advice without seeing all the deal paperwork, but I would have issued a demand for performance instead of paying the $5K. I'm not sure what extortion there was. What could he have done if you said "no?" It doesn't sound like your agent is taking very good care of you. If the short sale approvals are all in, are there any seller contingencies that the seller can claim are not met? If not, then the seller is bound to the deal and is liable for breach of contract if they try to back out. The only problem is you can't sue for specific performance unless the seller says they are pulling out, or the time for close of escrow comes and goes and the seller does not perform.

Sounds to me as though the seller may lose the property through the short-sale agreement cratering before your specific performance case would ever come up for trial, in which case you would be unable to get any relief other than money damages. Several questions then come to mind. With so many properties on the market, why pursue this particular one? And if you really want this particular house, perhaps letting it go into foreclosure and bidding at the trustee sale is a viable approach for you - it takes cash, but you might be able to prearrange that with the bank, and the bank is probably not going to bid it up.