A foreclosure or a short sale are no different than any other real estate purchase with two exceptions, first you have to negotiate with the bank, not just the owner; and second, you are most likely buying the property 'as is'. 'As is' means the owners, whether the bank or not, is not going to do any repairs to the property, you take it as you find it. Therefore, it is important to base your offer on a 'worst case scenario' and assume EVERYTHING is wrong with the house. Next you need to do your home inspection right away, don't wait for the bank to accept your offer. This is important because the bank will most likely try to negotiate the price and YOU need to know exactly the condition of the home so you can know whether to give a little and increase your offer or whether to stand firm. Having a professional opinion as to the condition of the home can be a very powerful weapon during the negotiation phase of these purchases, so don't hesitate to take a chance and spend the money. It will pay off in the long run.
Short Sales and foreclosures can provide a wonderful opportunity for buyers to get a very good deal but you need to work with a realtor who is experienced in these transactions and you need to listen to their advice and do exactly as they say. If you do, you'll be fine.