I understand that this is a short sale, but the seller still owns the home. They would have a right to be present. The inspector I use will ask the seller questions about the house but will never give them any information about his findings without the express permission of the buyer. The inspector is working for the buyer and will call the buyer aside on occasion to point something out to them. The inspector will ask the buyer if it will be okay to send a copy of the report to the seller, it's the buyer's choice to share or not.
Good luck with your negotiations.
Realty Hub, Inc.
Douglas Fuller, Realtor, GRI, ABR, e-PRO
Certified Relocation Specialist
Prudential Northern Arizona Real Estate
Direct (928) 607-0242
of the inspection with the inspector and your realtor at a different time/location.
On the other hand, I wouldn't stop making a stink over it. Your agent should explain to the other agent and the Seller that you want - demand - to inspect the home without interference from the Seller.