The bank is the one who makes the decision, so if they say they want $205k, then that's what it needs to be. Now, if the closed comparables don't warrant that price then your agent needs to be aggressive with the bank and show the comps to them because ultimately, no buyer will get financing for a price more than what the property is actually worth in this present market.
When I represent a buyer in a short sale situation, I always inform my client of the fact that a listing agent may have priced the home lower than what the bank wants. Some of the reasoning behind that is that they are throwing out a fishing line with hopes of "hooking" someone in order to get the short sale process started. So, as the buyer's agent I need to look at what the value is and let my client know that the bank will very likely come back with a higher price and they need to be okay a higher price or we don't put in their initial offer.
In the fall, I had the bank come back asking for $20k more than what my client was offering. There was no way the property should have been $20k higher especially being a distressed property. We pushed and provided comps and asked the listing agent to keep going back to the bank, ultimately we came up $1500 since we were asking for that in closing costs and that was it. The bank settled on that and my client closed 11 months after the initial offer was submitted.
It is not a fun or easy process, but if the bank is willing to forgive the difference of what you owe and what it sells for, you are in a better position in the end.
I wish you the best!
Keller Williams Realty Partners
Park Ridge, IL