This afternoon my wife and I checked out a short sale in North Park (San Diego) that seemed too good to be true and we were pleasantly surprised. My experience with distressed home sales, like short sales or foreclosures, is that they are generally a "pit" (as today's real estate agent described it). Typical short sales have marked up walls and stained carpets, while most everything else is in a state of disrepair.
The only problem we noticed with the property we looked at today was the up-heaved sidewalk. Hopefully that doesn't affect the foundation.
Unfortunately, we learned the obvious lesson you'll encounter when a home is aggressively priced: multiple offers after being on the market for only a few days which usually leads to a bidding war.