I found this article on short sales on About.com its an easy read and very informative:
Short Sales happen when home values fall and sellers do not receive enough cash from a buyer to pay off their existing mortgages, providing lenders agree to take less than the amount owed to them.
On the surface, it may appear that a short-sale buyer is getting a good deal. Although a slim margin of short sales may be profitable for a buyer -- because there are always exceptions -- much of the time, a buyer would be better off buying a home that is not in default.
You are unlikely to hear real estate professionals tell you that it's not a good idea to buy a short sale. In part, that's because real estate professionals profit on a short sale. Everybody makes money except the sellers and buyers. Realize, too, that listing agents might push sellers to list as a short sale, because if the sellers went through foreclosure, the listing agents will not get the listing.
In Sacramento, where I work, for example, many agents ignore short sales like the plague.
Here are 11 Reasons Why Buyers Might Not Want to Buy a Short Sale:
Read More: http://homebuying.about.com/od/4closureshortsales/qt/021208_BuyShort.htm
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