It is not crazy. If the buyer's agent utilizes the appropriate contingency clauses and forms, buyer's funds would not be at risk until the short sale was assured. However, there are questions you should ask yourself:
1. Is this home worth the extra trouble? Although you cannot see or inspect, is the area and potential purchase price worth pursuing this transaction?
2. Is this seller serious? Unfortunately, some sellers still use the short sale process as a means of delaying foreclosure without seriously intending to complete a short sale. Sometimes, a complete lack of interest in permitting showings or other impediments to the sales process are hints that the seller is not serious.
3. Is another short sale or other properly priced property a better option? This is already pending and has multiple back-up offers. Even if it was not a pending transaction, short sales are not guaranteed. Many short sales are listed at prices which are no where near what the lender(s) will accept. Inventory is rising in many areas, so other properties should be considered before counting on a back-up offer on a short sale transaction.
4. Do title records indicate this is a likely success for a short sale? Your agent can research title records to see the amount and number of liens that need to be negotiated for a short sale to be accomplished. One first trust deed might make for a likely success for a short sale. A property that has a first trust deed, a second trust deed, a home equity line of credit, a judgment lien, and HOA liens, without equity to even cover the first, is less likely to produce a successful short sale.