How do you know your offer wasn't submitted to the bank? Do you have a buyers agent and the short sale is listed by another different agent? With a short sale, the seller, not the lender has primary control. If they did not like your offer, there would have been no reason to submit it to the bank - especially if another offer that would cut the short sale loss was on the table. Some sellers are required to pay taxes on the deficiency amount so they of course would want the highest and best price.
Something is up, but in order to find out what it is, your agent needs to communicate with the sellers agent, especially if you offered the preapproved sales price.
Although it was said that attorneys are not used for closings in CA, that doesn't mean that you can't have one to advise you and help you sort through what is really going on. We don't custumarily have attorneys closing transactions in FL either, but I've had some buyers want attorney review, or a contingency on an attorney approval.
Either way, it seems like you need someone working in your best interest who communicates more clearly with you. If you are in Dublin, IRELAND, it is even more important that you seek assistance since the laws and customs of real estate in the States are so different than they are overseas.
Hope this helps,