So, let the Lender for your new build know what has happened with your Condo sale. I have to assume that the Condo must be sold in order for you to qualify for the new home. When the dirt start was contracted, there should have been a period in which they verify your financial qualifications. If need be you can usually get out of that contract.
Doing a short sale on your current home would most likely be a huge credit mistake and keep you from getting the new home. Short sales are usually only for homeowners that are in financial distress.
Again, speak with the Lender as soon as possible! And, of course always let your Realtor know honestly what is going on, so that your earnest money can be returned if need be on the new home.