The first thing to look at is the listing information sheet you recieved at the time you made your offer at list price or higher. If there was no disclosure of short sale or bank approval than the seller is obligated to sell the property. Also you don't mention if you were dealing directly with the listing agent or had your own agent. Check with an attorney as you might have a good case to be the buyer of this property one way or the other. If there is anything i can do please let me know. If you are working with an agent currently then disregard this offer and i wish you the best.
Dan Liese "The Hard Working Nice Guy"
So, it could be that after paying al the fees associated with sale, there is no money to pay the mortgage.
I hope that this help.
Feel free to call or email with additional questions.
Real Estate Consultant
First Weber Group
Certified Distressd Property Expert