In our short sale forms, make sure that you select the choice that will allow you to complete inspections after bank approval, this way you will not have to spend money for the inspection should the lender not approve the sale, or if you get tired of waiting for approval.
A seller always has to disclose anything they know about that is actually wrong, or has been wrong with the property. You should always get a sellers disclosure statement. If the home is a foreclosure that is usually not provided, as the lender/owner does not live, has not lived, and has no idea if this or that has leaked, etc. That's one of the reasons inspections are so good. It gives you a opportunity to really check out the home during the inspection time period. I have had buyers order inspections prior to going into contract, but that is usually not the case. The market today is moving quickly and most buyers want to secure their position in a contract prior to spending money on a inspection. We have such a shortage of good listings on the market at this time. Even in a matter of days, many, many offers can come in on one property. I wish you luck.
Both Gabe and Mike answered the inspections and disclosures questions that you had--quite well, I might add!
To answer your additional question--what are the cons of a short sale---there are numerous "cons" to a short sale. The worst one is that you have to be very patient when making an offer on a short sale. It can take sometimes 3-4 months before you even get a reply from the lender on your offer. True, it sometimes can take less time, but, if that happens, then you are happier! The other "con" is that not all people who are selling in a short sale situation even know if their bank will consider their property in a short sale situation. My suggestion to you is to make sure that you have a qualified Realtor working for you--making sure that they have been through the short sale process before, so they can guide you through the process.
If you have any further questions, feel free to call me or email me...