I'm Going through the process myself for the 2nd time this year on a purchase. First, find a Realtor that not only specializes in the area that you are looking at but one that has experience dealing with foreclosures as well as short sell properties. I have found that their are a lot of part time Realtors in the Chicagoland area so make sure that you are dealing with a competent full time Realtor.
An experienced Realtor will guide you through everything.
Second, get ready for a big waiting game with the banks! You would think that they would jump all over an offer but the facts are, they are so overwhelmed with foreclosures that your file just sits on a desk.
It's not uncommon to wait 30,45 or even 60 days for a response from the bank. Remember, these are hourly people that work at the bank and they just don't have the urgency like you would.
If you have the patients then it's a good deal, however, if the property is priced well or below comps then expect competition. Alot of buyers out there sitting on the fence waiting for the market to finally bottom out.