Hi, Larry. About 50% of the business I'm doing at the moment in OC is either in Short Sales or Bank Owned Properties (REO). Some unbelieveable deals are available, but Short Sales, in particular, can be extremely messy to deal with. This is often because they price the homes lower than the real value to obtain multiple offers, then have to wait for the bank (or multiple banks--a real issue) to agree to accept an offer. Bank owned REO's can be easier because you only need to negotiate with the Bank, however you'll often be up against multiple offers--plus, if the property needs repair, The property may not appraise high enough for you to get a loan unless you have an extremely high down payment.
Be sure you're working with an agent who has experience negotiating with Banks and who can help you make sure you're positioned properly to get that great deal!