There are actually a lot of folks just like you writing about the exact same thing here on Trulia! Unfortunately, a short sale is completely dependent upon the seller agreeing to the terms and conditions of the bank approval letter. So, at any time before close of escrow, it is possible for the seller to legally back out of the deal.
I know that is not what you want to hear. While it may not make sense for a specific borrower to attempt a loan modification, many folks who are facing hard times hold out hope for things that may or may not occur (and may or may not be in their best interest). I know it is hard to hear, but you may want to begin looking at other properties!