There are different possibilities of the situation. 1) The listing agent listed at $199K originally and received higher offer(s) such as $220K and approved by the lienholders (bank) at $220K. The listing agent has already experienced of lower offer $199K and got rejected by the lienholders. 2) The listing agent already has an offer submitted to the lienholders that is $220K, just waiting for the actual paper work to be finaled - the lienholder approval in writing and the buyer who submitted the offer has contingencies not yet removed. 3) The listing agent has back up offers in hand. 4) The listing agent does not understand how short sale works. 5) As per Naima mentioned that the listing agent is trying to generate more prospective buyers to submit offers. 6) There are many different senarios under different circumstances.
You should have your buyer's agent to explain to you how a short sale works and it involves a lot of complicated laws in different states purchasing a pre-foreclosure property.
The short sale is between the owner and the bank. The listing agent follows the sellers instructions.
I have noticed that some agents list a house for a bogus amount just to generate offers and then they put in the private comments that they can't guarantee that the bank will accept that price.
I hope that you have your own buyer's agent working for you.