Prior to executing the contract we were told that the amount the seller would be under was around 5%, and with the bank being the only lien holder, it seemed unlikely the short sale would get disapproved.

Approval or Disapproval will be mailed to you within 30 days of receipt of the application.

And everyone wants to talk a lot about what they are passionate about.David Weiss,I agree with you that taking action is very important, but I disapprove of your saying cancelling the contract if you cannot find a buyer.

No need to write a disapproval letter like most contracts start with.Anyone, correct me or improve upon the wording of the clause!

I assumed when I got the attorney disapproval there was another, higher offer.

Then return copy with approved / disapproved on each item so there was clear papertrail on what I agreed to fix.

Often you can call up the lender or loan broker, tell them the situation, and they might disapprove your loan for you, kicking you out of the contract. 

If my loan is disapproved due to this reason, would I lose my earnest money?

Our bylaws state "The Committee's approval or disapproval as required in these covenants shall be in writing." 

To add an extra layer, the disapproving extended family run a multi-generational real estate empire.