Legal Question in Real Estate Law in California

You are in the right category, and yes it is absolutely legal. The bank does not set the asking price in most short sales, and they would never want to. If they are going to take a hit by being paid less than is owed, but still release the lien on the property, they want as much as they can get. Most often the seller sets the price and when he gets what he thinks is the best deal, THEN goes to the bank and asks for permission to short sell. If the seller goes to the bank ahead of time, they will never give a firm commitment to any price. So basically when you go to buy at a short sale you have two sellers. And they both have to agree on the price. So if a full asking offer comes in too quickly, either of them are free to counter at a higher price and risk losing the sale. And the buyer is free to say no, and walk away if the sellers don't back off. The listing price is not an offer to sell, since none of the other terms of the sale are stated. It is a request for offers in the range of the listing price. That is why the pile of documents submitted by the buyer are called the offer. A seller can always counter an offer with a higher price.

I agree. You need to meet the price and terms expectations of the seller and the lenders. The approvals of all are needed in order to close a short sale.