Several of my buyers have looked at homes that were "short sales". A short sale is a sale where the seller owes more money to the bank than they are selling their home for. For example, they owe $120,000 and are selling their home for $100,000. I have been involved in a number of these sales. They usually take a long time to close and if you, the buyer, can wait it out you can end up with a nice home.
First the bank has to approve the price and this can take a few weeks to a few months. It is important to find out if the bank has assigned a negotiator as this is the first step in the process. Second the bank will send an appraiser out to the house to do an appraisal. Sometimes the bank will ask the listing realtor to send in comparables and do a fair market analysis. Then it may have to go to a bank committee to be approved. Make sure you know if there is a second mortgage company involved as this will take additional time too.
Be aware if there is work to be done and make sure you have taken that into consideration before you write your offer. If you ask the seller/bank to reduce the price due to items found in a home inspection, the bank will have to start the approval process all over again or they may not be willing to drop the price again.