What rights does a seller on a short sale have to back out of the deal currently signed and excepted? Does the seller have 21 day

it will depend on the reason for cancellation. Consult a real estate attorney.

First thing is to look at the purchase agreement. What does it say for cancel options?

It's really based on whats in the contract.. You have a real estate agent.. you should be contacting them and asking them what your recourse would be.. In most states, once a purchase contract is signed.. the buyer and seller are bound unless it's mutually agreed to cancel or the contract has a provision which allows it to be canceled under certain conditions.. for example, in AZ our purchase contracts have a provision for a 10 day inspection period.. the buyer can back out for any reason within this 10 day period.. but for the seller in AZ, the only way they can get out of the deal is if the lender does not allow for the short sale.. If you want to know what your specific rights are in Iowa, then call your RE agent, or call a local title company or attorney.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com