Not to put too fine a point on this, BUT I doubt that your agent is a dual agent. Your agent is the seller's agent--UNLESS you signed a Buyer's Agency Agreement with him/her BEFORE you made the offer on the house. Merely writing the contract for you/with you for the house DOES NOT make an agent a "dual" agent or a "buyer's agent." The presence of a signed Buyer's Agency Agreement makes an agent a dual agent when a client buys a house listed with the agent (or in some offices, with the agent's office).
This is not a minor point when you (and/or your attorney) threaten legal consequences. A buyer's agent and/or dual agent has significantly different responsibilities than one functioning as any of the other agency types (transaction, seller's agent, dual agent, designated agent).
In this transaction, you passed on the opportunity to have a personal representative when you had the seller's agent write the contract in the absence of a signed Buyer's Agency Agreement. You do NOT have a dual agent or a buyer's agent.
I'm sorry to hear about your bad experience in the past. Thanks for calling my answer "smart." You are right that REALTORS are not lawyers. I would never discourage anyone from seeking legal counsel.
I do want to clarify one thing: money down and earnest money are not the same thing. Your downpayment is made at closing, whereas earnest money is deposited into an escrow account when the property goes under contract. Escrow accounts are strictly regulated. If the seller defaults on this sale, her earnest money is not in jeopardy, though the timeframe in which she will get her earnest money back may be in question. A buyer's earnest money is in jeopardy when the BUYER defaults on the sale, either by changing his/her mind or by failure to obtain financing in the appropriate timeframe.
If you don't have any luck with the broker, you might have to look for another agent, as suggested previously. If you look for a new REALTOR, find one who has experience with foreclosure properties. It would be even better to find one who is experienced with short sales.
"Hurry up and look for another house" is not the only answer and should not even be the first answer. Hving a back-up choice, though, is not a bad plan.
Do you have a ratified contract? If you have a ratified contract with a bank approval on the short sale, then you might be just fine. The bank proceeds through the foreclosure process until they are positive they have it sold through a short sale.
In any case, I recommend you move quickly to find temporary quarters where your family can live, just in case. You might want to talk with the people who are buying your home - can then push back settlement if needed? You need a little breathing room to juggle whatever might be coming your way.
I hope you have an agent (I mean an agent for you, not the listing agent)? I hope so, in today's climate foregoing a buyers agent is a choice only a fool would make. Assuming you have an agent, hopefully he/she knows the ropes about these types of transactions, but if not, have her tap into the other resources at her office. The broker is actually who is representing you, not just the nice person you have been working with. The brokerage surely has a lot of experience - more than one agent could ever have - with dealing in these situations, and they will give you good advice. They'll know the specifics better than anyone here can.
If you don't have an agent (and maybe even if you do) you will need to hire an attorney NOW.