I am so sorry to hear that you are continuing to have difficulties with this transaction. I would strongly suggest, since it appears that several errors may have been committed--failure to disclosure that seller is a real estate agent, failure to disclose seller is owner, failure to properly counsel clients (you), failure to obtain an SSA Short Sale Addendum (which was created in November 2007 by CAR)--you should consult with an attorney regarding your remedies in this case. You might also try speaking with the agent's broker to see if you can get more assistance in resolving your problems.
While it is not illegal in California for a real estate agent to represent both the buyer and the seller, because dual agency requires a great level of expertise and knowledge, unless the agent has had experience in a similar situation, it's best to get an agent or real estate facilitator to represent you.
Good luck in the future on your next home purchase!
Grace Morioka, SRES, e-Pro, Real Estate Agent & Facilitator
Area Pro Realty
San Jose, CA
HOAs and short sales are a problem. They (the bank) can refuse to pay those fees. Usually the Agents reduce their commissions to offset what the bank will not pa for. The agents do not have to agree, but the smart agents that want to truly help the Seller and the Buyer will agree to the reduction. Client should come first.
You need to go the the Broker, there are a number of irregularities here that will be a huge problem for the broker and the broker's E&O insurance might refuse to cover the brokerage.
Your Inspection, Appraisal and Escrow penalty is questionable as to recovery. You might try a small claims action to recover those fees, but there is no guarantee. You need to put together a good paper trail showing that the listing agent was a problem.
Even if you signed the short sale addendum that would not have protected your inspection fees or escrow cancellation costs.
There are some very serious ethics issues with this transaction, you need to go to the broker asap.