A bank doesn't follow realtor rules; they usually put nothing in writing until they are ready to close. If they didn't issue you a counter offer in writing (I'd be surprised if they did) then you have no deal. Anyone else can make an offer to purchase that property if there's no mutually agreed upon deal in writing, that's why banks don't hurry with anything in Short Sales. (they are anything but SHORT)
My experience is that banks try to get the price up verbally and relay that info (suggest a higher price verbally as a matter of course) but are in no way committed to that; if another better written offer comes to them. That's how they keep you on the hook..hoping, yet with no witten guarantee . You need to be happy with YOUR decisions to stay in it no matter how long it takes; if not then you'll move on to something else.
The fact that they changed the auction dates twice is not unusual in this market either. I had that happen to a deal I had for 5 months of waiting before my folks backed out from the deal; that property was supposed to go on the block, but didn't..that was 4 months ago and is still for sale as a short sale. Not fun! Best of decisions to you!