What are some problems with short sales?

From a buyer's perspective:

Short sales can take a long time to negotiate, especially if there is a 2nd or 3rd mortgage on the property. It will take 30-45 days just to get a response to your initial offer.

Just because you have a verbal approval of the sale price does not mean that you have a contract. Getting the purchase contract ratified by all three parties can take a long time, and without that contract any of the lenders can still foreclose on the house.

You as a buyer are going to incur more closing expenses than you would with a traditional transaction. The 3rd parties often do not approve closing assistance or repair allowances If there is a negotiator in the mix, you the buyer will be expected to pay their fee, which is usually around 1% of the purchase price.

The extended time of the negotiation process can actually lead to all parties agreeing to a price that, when the time comes to appraise the home for your mortgage, has actually turned out to be higher than market value. The price slide seems to have slowed (touch wood), but to go through all that time and then not have the home appraise? That's a horrible situation!

If you've got a bulldog of a realtor on your side, you can, potentially, get a great deal on a great home. I don't suggest you totally avoid shorts, but don't look just in the short-sale world for deals either. Just yesterday I had a client who had pulled 4 shorts in one neighborhood that he was interested in, priced $220-$230K. He'd missed the pristine bank-owned home right next door for $200K.