Elizabeth unfortunately at this point it is not up to the seller to negotiate anything. Depending on what bank he is with this could drag out awhile. Some banks FHA included will not allow the seller to sign anything. For one at that price and if he cannot pay the difference then he cannot (by himself) deliver a clear title. He must have the approval of the lender. Unless they specifically said they have a 45 day period then it may take longer. Also your agent needs to be aware and in the process or he/she may not get paid or at the very least they may have their commission cut. There is always the chance it will go through. One of the most frustrating parts of this type of a transaction is the lack of any set guidelines. Each bank is different and they follow their own rules. As it is they way I read it you are asking the bank to give up over 29% of the money owed them. That includes taking out for the agents commissions. It is a possiblity depending on how the market is in that area and the apprasial. But, there is an equal chance the bank will say no. Just remember in a Short Sale you are not just negotiating with the seller you are negotiating with the bank.
Hope this helps,