Tristan got it pretty close in his description. Another thing to consider is the fact that banks are overloaded with short sales right now. It takes a while to get them done (sometimes up to a month just to get a response). Feel lucky that you at least got an answer. Because of the flood in short sales right now, the bank may have developed a threshold for sales which automatically rejects offers below a certain price point. This could be for a number of reasons.
1. They may consider your offer unrealistic based on the available information.
2. Countering your offer may be considered a waste of their resources better spent on other concerns.
3. They may speculate doing better at an auction for the property than anything below a certain point.
One thing to understand about banks...they are in the business of MONEY, not real estate. They don't want to haggle over a home in their inventory, they want to sell it and break even. They get pummeled all day long with lowball offers from people trying to get the best deal, and have realized that many of them are not worth the hassle. A lot of buyers simply don't understand the situation enough to put in a realistic offer, and banks have caught on that these people will never offer what they need. So, they get rejected. Understand what the banks need, and give it to them. You will get your house.
Of course, if you don't feel like the home is worth what it costs, then by all means, don't buy it. But where is your information coming from? Have you done a CMA on the neighborhood? Is the home in disrepair? Just because the economy is bad doesn't necessarily make a home worth less than what a seller is asking. Perhaps that $150k adjustment dropped it way below market value and any lower offers will not be considered. What do the comps say? If you have a Realtor, what does he or she say?
You mentioned that it originally sold for $400k. How long ago? The price was dropped $150k over the past 6 months. What was the original asking price? And what was the asking price when you submitted your $252k bid?