Definitely negotiate a lower price. If it doesn't work out, find another. Gaithersburg has a ton of distress sales (I'm assuming the property is in Gaithersburg based on your question) -- check out http://mocorealestate.com/foreclosures/
Talk to your mortgage guy about options to finance closing costs. This actually may be tough to do since underwriting would still look for a set loan-to-value percentage.
These folks are right. Short sales are tough and a lot of times banks won't work with you to come up with a creative option. I would lower the offer. Please note though, that mortgage guidelines dont permit you to roll closing costs into the mortgage on a purchase
Best of luck