Daily negotiating is what it takes. We close or Short Sales within 90 days. It doesn't take forever, it just takes a good listing team to get it done!
It is perfectly normal for the bank to request updated financial information and request another appraisal especially when the transaction has taken an extended amount of time. Appraisals are only good for a certain number of days and of course a buyer's financial situation could change during the course transaction period.
If more than a few months have passed they will require new sellers financials AND for an opportunity to 'RAISE THE PRICE' if the market is improving in your area.
You have posted that the bank is wanting both the seller and buyer financial. THAT would be unusual, but in short sales, there exists an illusion of rules but anything can and does happen. If you don't like what the 'bank' is doing, your only option is to withdraw.
Don't expect normal.
Don't expect good faith.
Don't expect common sense.
Don't expect anyone to care about buyer issues.
Don't expect logical, linear process.
If you want to buy or sell a short sale. expect a miracle.
Miracles are not discounted and take an eternity.
Best of success to you.