The process of buying a home whether it's a foreclosure, short sale or regular resale home is the same. The difference is the length of time involved, the seller and the paperwork.
Regular resale homes - you are dealing with an individual homeowner who has the flexibility to negotiate and typically they have a need to move out rather than wait for a buyer to come up with a higher price.
Short Sale homes - these are homes where the seller bought the home for a higher price than it is worth today. These sellers still have a mortgage loan that they need to make monthly loan payments. However, because the value of the home is less than what they owe to their bank, the seller negotiated with their bank to sell their home at a loss and the bank agreed to accept the loss. As a buyer, your offer is first accepted by the seller, then it needs to be accepted by their bank. Since the bank is taking a loss on the deal, don't expect the bank to accept low ball offers. The bank knows what homes are selling for in the neighborhood and will only accept a fair and reasonable offer. The consequences of doing a short sale is the seller's credit score will drop - a lot.
Foreclosed homes - these are homes where the owner is having severe financial difficulty and cannot afford to pay their mortgage loan, property taxes, monthly bills, etc. However, they still want to live in their home and refuse to move out. The issue is once you buy a home, your lender expects you to make the loan payments on time for the entire length of the term. If you fail to make the payments, your lender has the legal authority to take your home away from you (foreclose on your home). The same with property taxes - if you fail to pay your property taxes, the county where you live has the legal authority to take your home away from you.
As you can imagine, these owners don't want to sell or move out and they can be very angry because they are being forced to move out against their will. Many foreclosed homes have been damaged by the owners as their sweet revenge. If the home has been damaged, it will be the buyer's responsibility to fix it and pay for it out of their own money.
The buyer is either dealing with the bank or the county to purchase the home - not the owner. Buyers need to be extra cautious because the bank or the county will have no idea about the condition or the history of the home.
Selling prices will be much cheaper for short sale and foreclosed homes because of the bank or county's involvement. This does NOT mean you are getting a bargain or a deal. In some cases - yes, in other cases - no. Buying a home thru the owner / seller without any bank involvement can be a better deal than a short sale or foreclosure - in many cases - not all.