High offer can botch short sale

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Q: I’m in the process of trying to buy a home. I made an offer on a home that was a short sale and, because there were several other offers and I really liked the place, my offer was above the asking price. The listing agent said I was the highest bidder.

Then, we got a counteroffer from the seller and it was actually for a price lower than the price I’d originally offered! Then, my agent suggested that I make a counteroffer back higher than the seller’s counteroffer but lower than my original offer price.

I am totally lost here — I don’t understand what the seller’s strategy is or what I should do next.