Where are all the local agents on this one?! :-)
First of all, kudos to you for not being scared away by all the short sale naysayers out there. Buyers and I completed many short sales last year, a couple of them with FHA financing even. It involves more work and a lot of vigilance, but it is indeed possible. Second, be leery of blanket statements. Some banks are more challenging to deal with than others, but there is still a real human being on the other end -- an asset manager or loss mitigation specialist -- who may be capable of end-running corporate idiocy. Especially if yours was the only offer, or if your offer was substantially better than the runner up, you may be able to get a concession of some kind. Third, as with most things, it never hurts to ask. It doesn't really matter whether it is a credit to closing costs or a price reduction, a 3% price reduction or a 3% credit affects the net proceeds to the bank the same. I have been involved in short sales that had price reductions AND credits to closing costs... in the same deal. If you have an inspection contingency, keep in mind your objections can be not just about the physical aspects of the home, but the environment (crime, noise, congestion, etc), the permit history (most homes in Berkeley/Oakland and environs have unpermitted work), the insurability (fuses vs. breakers, galvanized plumbing vs. copper, etc.), or even the preliminary title report (which would reveal utility or other easements that may be objectionable). As long as you have not removed your "inspection" contingency (technically the "Buyer Investigation" contingency), you can get out of the contract for virtually any reason. Not that you want to get out.... but if you can't get what you need in concessions to feel comfortable with the purchase, you won't have to prove why you want out if you decide that you do.
Having said all of that, keep in mind that it is often difficult to get into a home in Berkeley, and the grass isn't always greener on the next property.
Again, kudos to you. It takes spine, tolerance for ambiguity, and perseverance to get as far as you have. You should be proud of yourself.
Best of luck,
Red Oak Realty