The input from my colleagues below is right on target. I would add that many buyers mis-perceive that buying a Short Sale property is the same opportunity as an REO (bank-owned/foreclosure) property and nothing could be further from reality.
Dealing direct with a lender who has repossed the property can offer a few advantages:
1. The seller-in-distress issues are removed from the equation and thus streamlines the transaction timeline.
2. Banks may be willing to accept a price lower than what the loss-mitigation department would have considered acceptable during the short sale stage. This is because they are guided by the property's appraisal and generally look to the lowest rung on the ladder of fair market value.
Finally, if you do write an offer on a short sale property, make sure your agent writes in a Subsequent Offer clause that would prevent the seller and lender from accepting an offer (presumably with a higher purchase price) after your offer was accepted and escrow opened. This measure reduces your risk of wasted dollars on appraisals (required by your lender) and the physical inspection. If the lender is unwilling to accept this condition, you might be better off looking for another opportunity.
Coldwell Banker Brentwood