Have any of you had the experience where your contact at the lender/AM receives and offer makes a counter and then Senior Management refuses to sign off on that offer? What happened? How was the situation resolved?

Haven't had that happen, but many times in the counter offer is verbage that states "subject to senior management (or investor) approval". If it is in the counter then the seller can withdraw their counter offer, even if the buyer has accepted the counter.

If the buyer had not yet accepted the counter offer or issued a counter to the counter, then the seller can withdraw the offer at any time, even if the verbage was not in the counter offer.

In either event, go along with your sellers decesion, even if the buyer or other agent is upset.

In my opinion, whether a normal sale or REO it's not a deal until it's signed and delivered.

Yes. An offer came in on an REO property and was submitted to the Asset Management Company. The offer was countered by Asset Manager. The Buyer then countered back. The Asset Manager accepted the counter.
After a week of waiting for the Bank Contract to be sent, I was informed the investor had decided not to sell the property in "As Is" condition and was going to repair it and sell it that way.

This is totally legal. As Dennis said above, "It's not a deal until it's signed".

I know that it can happen and that everything is subject to being signed off by whoever is authorized to do so, I've just never happen before so I was wondering what other's experiences were. Thanks!