Everything is negotiable in Real Estate. The thing you need to know is that Short Sales are not foreclosures and very rarely are they going to be the Deal of the Century type of thing. Banks still expect to get close to market value on these homes.
When first putting in an offer on a short sale, you will need to know the comparables of the sold homes in the neighborhood. Once you have that figured out you can negotiate. The seller still has the power to reject, accept or counter your offer. The bank approval is a contingency on the overall offer. If you come in too low and the seller accepts, most likely the bank is going to reject or disapprove the short sale. Remember that these banks get an "as is" appraisal or Broker's Price Opinion (BPO) that they will be relying on for their price. Additionally, bank will only accept a certain percentage below that. In essence, the bank will need to "net" a certain amount to accept your offer and approve the short sale.
So, as far as your question..is there haggling involved...a little. You need to have an agent run the comparables and let you know what the market value is of the home and then construct your offer. Additionally, there may not be a whole lot of money for repairs and if you are looking for closing cost assistance, depending on the type of loan that the seller has, you will only be allowed a certain percentage of that.
Short sales require a knowledgeable agent and I suggest that you don't try to tackle one without an agent. Additionally, they may take a little time to go through and your earnest money may be tied up for a little while and you may still not be approved so patience is the absolute key with short sales. Banks have gotten better and faster, but short sales can still take a while.
Good luck and if you have any questions or need an agent to assist you with the purchase of a short sale, I would be happy to help.