Also some servicers are offering Deed in Lieu of foreclosure to Sellers in the middle of a Short Sale so there is a possibility the seller will just deed it back to the actual lender. Additionally there are Deed for leases being offered to owners so they can stay in the house and become a tenant and rent at below market rates.
The HUD statement should have been provided to the lender within days of your contract acceptance. All Short Sales have to submit a HUD upfront with any offer so that's no indication of progress. The Arms Length letter also is a standard form that most lenders require but doesn't show it is progressing.
Hopefully your Realtor will get the approval letter soon but expect to close in 4 months or possibly longer and while you're waiting, continue to look at "genuine" bargains, bank owned fixer uppers.
All the best,
Your agent should be keeping in contact with you and giving you any updates they get. Hopefully you will be moving forward soon. Good luck!
Tammy Hayes, Realtor
Green Lion Realty, Port Charlotte, FL