Your statement that your Agent is worried about passing inspection leads me to believe you want low-downpayment FHA financing. Ask your Mortgage Broker about 203K financing. I only want to add that a lender evaluates a short sale based upon the seller's hardship and what the bank needs to net dollar-wise, to be able to writedown the existing debt. A bank is not a party to the short sale transaction as they are in an REO transaction. With that said, a buyer and seller should negotiate everything, as with a traditional resale. BUT, there are situations in which the hardship is so dire, that the seller will bring nothing to the table in the negotiation. It is like trying to bargain and dicker about a price that is blow-out-bargain-basement low already. That is the extreme...the lender doesn't require a short seller to give up their last red cent to satisfy the debt. So, lets say, a $500 window needs to be repaired. A lender is not going to reject the offer becuase the seller should be using that $500 to pay any back payments. The deal with short sales is that every case is different because it is based on the seller's hardship and no two sellers share the exact financial dynamics. Your Agent should be negotiating to your benefit. With that said, lenders have had months of experience now working with short sales and they are getting better at it. One of the first guidelines that they are following is to frown upon "low-ballers". If an Agent is advising you that your offer should be adjusted down from jump, on the supposition that the bank will reject it if repairs are requested, is premature and may not be the best advice if the bank perceives it as "low-ball". Offering 85% of market value as a blanket policy is just naive, especially if you are writing that type of offer for a property that only needs paint and cleaning, or a new set of closet doors in one of the bedrooms. Don't assume that your required 'creature comforts' are going to be considered material defects. Most likely, you will end up one of those buyers who sit and wait six months to hear absolutely nothing.
Perfect example, I closed a short-sale listing that I had in 30 days with Section 1 repairs paid for by the seller. Part of that had to do with the lender's policies and the other part had to do with the offer.
Best advice - Select an Agent with short-sale experience and choose an Escrow Officer that has the experience also. It is probably easier to find the latter, in any case.