If you are really in love with the house, then stick to your price and have your realtors provide you with:

1) BPO
2) Net Sheet

These 2 things will tell you if your offer is viable to the bank. Also, follow up on your realtor as well as the realtor listing the short sale. Short sales require ALOT of follow up with the banks to make sure they are not putting your file away. Call daily if you have to.

Don’t put all the blame on your realtor. Lenders are acting like idiots right now and should jump at any offer on a home in default. Why don’t you ask if either of the realtors have ever done a short sale. If not, you can find a short sale negotiator to handle all the communication with the banks. The negotiator is paid by the lender so the realtors don’t have to stress about losing their comission.

Good luck on your endeavor – but please let me part some advice before I go. NEVER NEVER NEVER fall in love with a house you are bidding on. Not in this market and not at these prices. Get over it and get over it FAST! Use your head or your heart will lead you to financial hardship.