What is PERMITTED is dictated by the bank.
Some banks (Nationstar) say all agents must be non associated, not even in the same office.
Then when they get a buyer and the price is agreed to,,,Nationstar decides, "We'll have a auction to see if we can pump the price up!" Now that should not be legal when a purchase contract is in place...but there you have it
The moral to the story is, there is no GOOD FAITH PARTNER on the other side (bank) of a short sale transaction. Why you would think those assisting the buyer or owner to be outside what is legal is a thing of curiosity.
If you want to know if it is LEGAL, you will need to pay an attorney for such information.
Is it permissible. You bet.
It is the bank/investor who dictates the rules or who chooses to ignore the rules or makes them up as it pleases them. The real estate professionals involved are on task to be sufficiently agile to stay ahead of the games.
Tell us, what is your interest in the sale of this property?