REO's have they been involved in? One or two won't cut it. This is an art. Do they do their own work or do they have an experienced TEAM that negotiate their short sales? It's like the analogy of using a GP to do major surgery.
I would have your agent check in to this with the seller's agent if there is something at issue.
Are you including the transaction costs of selling? Could be why the SS point is higher than the unsatisfied mortgage. Also, if the sheriff sale happened the bid amount is usually different than the mortgage amount.
You might want a facilitator in this transaction. Banks usually like to see homes marketed on the MLS, and quite frankly this is a very challenging transaction unless you specialize in short sales and foreclosures.
Hit me up if you are interested, otherwise good luck!