Sounds like he's following some of the educators out there, like Carlton Sheets, or Robert Allen.
I would make all decisions based on what is in the best interest of the seller. How much time is the buyer/investor expecting him not to accept other offers? Are you in contact with the bank to help negotiate the purchase offer with the lender? If it were me, that's what I'd be doing rather than leaving it to the buyer/investor. He's going to represent himself, not the seller or yourself.
You know that in most short sale situations, the lender often renegotiates your fees. Are you willing to let the buyer walk in and control it? I wouldn't be interested.
His concept to do a double close is doable, but not always practical. One, the buyer needs to do an assignment that is notification to your seller's lender. The lender may or may not have an issue with it. Second, finding a second buyer may not be a problem but most lenders will not approve a flip purchase, so the new buyer may not be able to get financing.
Last, is a contract recognized in NJ if no value is transferred (such as money in escrow)? It isn't in California.
Hope this helps. I'd insist on staying in control of the negotiation with the bank if I were you.