Phyllis Watson's Q&A

Short sales are a difficult process to understand for many reasons..pricing can be the most confusing.   The listed price is a arbitrary price set by the agent and it may or may not be realitic in regards to what the bank will require to approve the sale.  The list price should be based on recent comparable sales, as that is generally the price the banks will ultimately approve for the final sale price but, unfortunately that is not always the case.  The bank will do a formal appraisal of the property prior to responding to a short sale offer and the bank bases the counter offer on the market value of the home.  Generally, if the offer is more then $5K lower than the appraised price they will counter the offer with a figure that falls in their approved value range.   Ask your agent for recent sales of similar homes so you can better understand values in your area.

I would recommend talking with the agent.  She may assume that you prefer "driving the process".  If you talk with her and are still not satisfied, you are free to end your relationship, unless the short sale offer is accepted and then you do have a binding relationship with the agent.

I don't believe the seller can receive any funds/proceeds from the sale of the home.  I would have your agent notify the lender immediately.  I would also have your agent contact the California Association of Realtors legal hotline to confirm the legality of the seller's actions.  The service is free to Realtors.Good luck!