You should discuss your concerns with your agent and protect your earnest money if this does not close. You could also try to buy the property after it forecloses perhaps for less money than your current offer.
This is what sort of happens in a short sale;
You write an offer
The seller accepts that offer contingent upon the bank approval
The bank approves (or counters) the offer
The Seller and Buyer accept the new Terms
The contract proceeds as per written.
Your agreement is between you and the Seller. If you are exercising an option in your contract you need to have it in writing and agreed to by the seller. This would change the terms of what the bank has agreed to and the process can start over again, unless you and the seller work out the details without changing the terms of the bank. But the Bank still has final approval and the Bank will see on the HUD statement any changes.
The bank can foreclose anytime provided that the due process and notification has been followed, regardless of the short sale approval.
Good luck to you.
We had mold in one of our units just before a short sale. Our guy did it and found there was very little mold after all and it was a lot less expensive that originally thought. I think the mold inspector was also a mitigator and wanted to make some money. The association had to repair it right away and were responsible for it because it was in an exterior wall and not do to any actions of the owners. I wouldn't be worried about the mold as long as you have your own people do the work. $1300 shouldn't be a big deal for the Association to come up with if they have a reserve fund. But they may not be responsible for the problem. Good Luck!