i don't know the details, and your post is confusing.
A brand new townhouse fpr $170K I find hard to imagine, but it depends on the comparables.
I'd ask your Realtor to run some comps and see.
I assume you have a listing agent who is assisting you? Hopefully, that person is experienced with short sales and has good resources. I also hope you've consulted with an attorney and tax consultant.
Short sales are NOT easy to navigate - for anyone. Unfortunately, almost everyone in the game is a loser, it's just that everyone is trying to control their damages as best they can.