Hi Dee--you've gotten some good infomation, but I'd like to add my two cents.
First of all, short sales are NOT AT ALL like buying from a seller in a regular transaction. Short sales occur because banks lent money on homes that then went down in value. The home owner--for one reason or another--wants or needs to sell the home, but the home is no longer worth what is owed on it. Therefore, the lender must agree to take less than they have already lent on the property--to "short" themselves--and accept a payment that allows them to mitigate their losses. In other words, the seller is not in the driver seat--the lender who holds the mortgage is.
Therefore, it is up to the mortgage holder to decide what closing costs, if any, they will pay for the buyer. Like many sellers in today's market, banks realize that many buyers don't have a lot of cash beyond the down payement, and many of them are prepared to pay reasonable settlement expenses. Some are less reasonable, and keep in mind that they will look at your offer as a whole--how much you offer, the amount of closing assistance you ask for, whether or not you ask for things like a carpet allowance, etc. You ask about possible damage to the home, but foreclosed homes aren't necessarily homes that have something wrong with them. Sometimes, homes are in foreclosure because of job transfers, loss of employment or other financial problems and not every owner responds to these pressures by damaging the home. (When I used to show HUD homes and VA homes, buyers often assumed that these homes would be in shoddy shape. They were often surprised to find that the homes in decent shape.)
Although there is no length of time that is true for every short sale, short sales do take extra time to complete. Here's why. Unlike a motivated seller, the bank will answer offers at their convenience--not yours. Even if you offer what the home is listed for--which (if the agent is experienced and knows what to do) will be the current value of the home--the bank will still be looking at that offer unhappily. Even if they get "full price," they are still getting less than they are owed. Also, many buyers and agents will offer below the asking price hoping to get lucky with a low offer. (Some do, some don't--it varies.) So, even with your best offer, the bank make hold on to that offer and delay responding because they are hoping for a better offer. (It's a little like taking an engagement ring from someone who is stil not sure they want to get married.)
It can take a long time to hear back from a bank about an offer you've submitted. (I started one in September--we closed in February.) Once they do accept your offer, however, you're usually expected to move, move, MOVE. You may have a month to get your financing finalized and your move-out/move-in arrangements in place. While you are waiting, there is virtually nothing you can do to make the bank decide faster, although you can (and probably should) continue to look for a home you like. (If you DO find one, be SURE your agent withdraws your offer to the bank before writing an offer on another home.) Waiting and then hurrying can be maddening. Will you still get your promised rate? Maybe--if it hasn't expired. What if your loan is still available but the interested rate is higher than what you were quoted two months ago--when you made the offer? The bank will see that as your problem, not their problem, and you may have to proceed with the loan anyway. What is you don't have enough notice to give notice to your landlord? That, too, will have to be dealt with on your own. While it is easy to blithely characterize real estate professionals as not wanting to work with short sales because it takes longer to get paid, it's a little more complicated than that for some of us.
Also--you should know that until very recently, agents who did stick in there for the long haul and help their buyers and sellers navigate short sales often had their comission held hostage at the closing table--they were promised one comission amount, but told they had to take a smaller payment in order to close the sale. None of the other professionals in the transaction--the lawyers, title folks, surveyors, appraisors, lenders, etc, were told they had to take a price cut--only real estate agents. Legislation recently passed to protect agents from this unfair practice.
In "short," short sales can be worth looking into, but they are certainly more complicated to negotiate than a typical deal. Do choose a Realtor who has some experience in dealing with short sales, and who is willing to put in the time, effort and know-how to make your short-sale purchase run as smoothly as possible.
Good luck, Dee! Happy home-hunting!