As sdrealtor pointed out, you can simply walk away if the seller cannot coerce the tenants into leaving.

If you refer to the standard residential purchase agreement, there is terminology that obligates the seller to deliver the property to you unoccupied. As sdrealtor pointed out, you can go through escrow, get your inspections done, do everything that you need to do presuming this will happen. When you come up to the closing date and you need to sign the loan docs, if the tenants are still occupying the home, then you don’t sign the loan docs and walk away.

Now, you will be out the money you paid for your inspections, appraisal etc, but that is a small price to pay. You can try to get the seller to cover those losts costs after escrow is canceled but that will be your task, not your realtor’s task. It will most likely involve small claims court. You can attempt to obligate them contractually and to be sure the default will be the sellers fault, but trying to get blood from a turnip is never easy.

You may think the bank has a vested interest in this but they do not. The bank will either get money from the short sale or they will get money from an eventual foreclosure. Don’t delude yourself and think the bank needs the money. The banks have all been bailed out to the hilt so they have no vested interest in anything. The only think the bank has a vested interest in is removing any and all liability from everything they do. No bank would ever obligate themselves to any obligation from a tenant. There is no relationship between a bank and a tenant so why should the bank create that relationship? Makes no sense.