The contract is between the buyer and seller with the condition that the lender approves the contract. So the answer to your questions is YES - a seller can reject a low offer and NOT submit it to the bank.

Sorry jarvier, you are wrong

to make a short sale offer, the offer goes to the homeowner who in turn will send to bank for their approval.

The seller has Federal rights, and the buyer cannot go around the homeowner

I deal with one of LIBOR's attorneys and they have made me understand that it is a MUST..., ALL OFFERS ON SHORT SALE PROPERTIES MUST BE PRESENTED TO THE BANK! "Any broker(s) who do not can be charged for being involved in conspiracy to commit fraud against the lender". The FBI is actively investigating parties to mortgage fraud in short sales, with their attention focused on Realtors, owners and related parties who knowingly undermine the opportunity for banks to recoup as much of their loans as possible. The failure of making the bank aware of other existing offers either at the direction of the listing broker or the UNLAWFUL instruction of the homeowner, or being a party to a transaction where the purchaser fully expects to flip the house, makes the participating players a party to fraud in the eyes of the federal government.

You can see this in the LIBOR link below and the April 2011 LIBOR News Publication...

Until the home is officially foreclosed it belongs to the seller. You have the right to reject any offer. Furthermore there is little sense in accepting an absurdly low offer as it has very little chance of aceptance and will in all likelihood, just waste your time and deter more serious buyers from making an offer. But keep in mind the agent must present the offer, even if it's made against his, or her advice. Your listing agent should be able to provide you with guidance and at least a ballpark of what the bank might accept.

The seller can accept, or reject, any offer he/she wishes; keep in mind that in a short sale the lender is looking to get as much money back as possible, and in order to determine a fair offer, always review comps with your agent, recently sold similar properties in the immediate area; see what the data suggests and go from there. So not to waste anyone's time, keep in mind that low offers tend to go nowhere fast....

Charlie,

With all short sales three are two acceptances.....first the owner and then their lender(s)...in that order......Without both, you have "Zippo!"

Bill

You don't have to accept anything you don't want to accept. Talk to your Realtor and see what he/she suggests. Why not make a counter offer? Yes, on a short sale you can do that! Remember, the contract is between YOU (the seller) and the buyer. You get to decide which offer is best. Good luck!

Charliethehat,
Yes, a seller can accept or reject any offer and until the bank owns the home, it's the current home owner’s choice. I will go even further; a seller should reject an arbitrarily low offer on a short sale. Once an offer is submitted, in most places the status on your MLS will probably change and showings will come to a halt. Effectively taking a house off the market at a price the lender will likely reject is not a recommended strategy.
My suggestion is that if you are interested in buying a short sale, you should get a good deal to be willing to wait for an undetermined amount of time. However, to increase your odds of success, your offer should be at or very near at a price the bank will say yes to. How much below fair market value will depend on your area, the lender and how badly you want the house. Your local agent will be key to advising you on this.