Nancy, I happen to "slightly" disagree some of the mentioned below. I do short sale listings as well and if the listing agent knows what they are doing, has experience doing it and is persistent with the banks, some great deals can be had.
I will agree though that they do not always get approved ,but if the agent has the full financial package submitted with accurate, non biased comparable sales and actives (shows the trend), you are likely to get a reasonable response or acceptance from the bank.
Do they take time??? YES, you must have a great deal of patience but if its the right house, in the right neighrborhood and there are no better deals to be had at that moment, go for it! You have nothing to lose. Everyone gains from your offer.
Here's why? 1) If you get a great deal, you win; because its likely that the house was kept in great shape (otherwise, as a agent you wouldn't have taken the listing. Any agent is not going to list a dog and still hope that a buyer will want it, let alone have the bank approve it)
2) Even if you lose patience or find another beauty (bank owned or conventional) that can close quicker, the agent wins because they have an offer to present to the bank so that they can possibly achieve an "approved shortsale status" which makes it quicker for the next person that comes along. (helping the seller get out from under that debt and keeping another bank owned off the market :)
So, as someone that handles shortsales, don't shy away from it. The worst that can happen is that you filled out a little bit of paperwork & then decided to walk away, no harm, no foul! Just because you write the offer in California, you still have 17 days to change your mind, AFTER the offer is accepted, and obviously even longer if they haven't yet accepted! :) Good Luck!
As far as auctions, they are just as squirrely. Depending on the type of auction you attend, your offer that is accepted that day as the highest bid, can still be rejected by the investors that must approve the final sale, taking many days if not weeks to find out. Unless of course, you bid at the reserve price.
Bank Owned are awesome because the banks are starting to keep the properties in better shape, watering lawns, painting or fixing things in some cases and answer very quick in most cases! Again, we are back to "the transaction is only as good as the agent is responsive!" If the agent has several hundred bank owned properties and doesn't answer their phone, it may take several days or weeks to get responses with those too.
Conventional sellers are always quick but unfortunately they just can't compete with the crazy decline in prices as of late. But here too, there are exceptions; if the seller has a great deal of equity and needs to move quick, you can get a screaming deal there too!