Trying to buy a short sale - Trouble!

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Recently my fiancé and I found a house that we fell in love with and after having the opportunity to view the house we found out that it is a short sale. The current debt outstanding on the house is 365K and is held by two different banks. The first bank holds 330k and the second bank holds 35k. We made an offer and the sellers accepted our offer of 335K but the banks will not come to an agreement on how to break up the amount we are offering to cover their debts.

I understand that the first bank has collection rights and the second bank only can recoup what is left. What the first bank is telling us is that they are going to take the full amount of the debt owed to them and leave only 5K for the second debt holder. Because of this, the second debt holder will not sign off and is willing to take this to foreclosure. I guess the second bank would keep a lien on the house.

The sellers' attorney is having a difficult time with the banks and doesn't think that he can bring the two banks to an agreement.

Can anyone tell me what the normal process is? Should we get our own attorney (I mean one who specializes in short sales)? We want to get this house before it goes to auction as we think it is great value at the 335K number. Any help or guidance would be greatly appreciated.