I'll answer your questions as best I can -
1) With an active ss it's best to get your offer in quickly if it's a good property properly priced. If I receive a group of offers on a ss listing I look at them and try to determine 1) Best price 2) Best Terms - amount down, net cost to bank 3) The quality of the prequal - is it from ABC Loans or a lender that I know and recognize from my area 4) The Selling agent - do they know what they are doing and do they have a client that they think might go the distance?
Your offer should be priced according to the comps for the neighborhood because if it is accepted the bank will be sending somebody out to check values so you want to be in range. Sometimes inexperienced agents will list a ss too low and many times those are the ones 3-5 months down the road that come back on the market because the bank won't accept the price.
2) Ultimately the Seller/Owner chooses which offer to accept. After we've gone over the offers and items 1-4 above the Seller decides which offer to select and send up to the Bank. Then it's up to the Bank to accept it.
3) If a ss is approved and comes back on the market because the initial offer didn't fly the price can still be negotiated but it will have to go back through the ss process. A recently approved ss can usually be purchased at that price without going back to the investor for approval. If you bid lower then another appraisal might need to be done to establish the lower value and the investor will have to approve that lower price. This can take a while again.
4) I have noticed less quality inventory and they are moving quickly. I sense a bit of a change in the market, and higher pricing, but am not sure if it's a blip or a trend.
Hope this helps, and please don't lose faith in we Brokers - some of the replies below makes us sound bad, but most of us are good and fighting the good fight!!! 
Have a great day,
Julie S.
Thank you everyone for responing to my post. Your experiences, thoughts, and suggests are great. I do believe that sometimes it does matters who you know. And i think a lot of people are going with the listing agent to get the home they want to buy. This way the listing agent has an incentive to turn down all other offers (higher, lower, etc) that come their way to get the full comission: listing comission and selling comission. I've heard of a couple stories where this has happened and where it's worked too. Is this practice illegal?
This reply is in response to "disappointed" newbie who lives in folsom.
It would be interesting to see if the house actually gets approved for $300K. And from the sounds of your research and analysis the home next door to you will not sell for $300K.
The short sale process is a personal matter between the home owner and the bank. But wouldn't it be nice to know everything that's going on between the two parties? There's a very interesting real estate agent in Sacramento, Elizabeth Weintraub. She post up to date information on all of her short sale listed homes online! Of course the information is only on the home she's the listing agent for but it'll give you a good idea how the short sale process works in the Sacramento area.
http://elizabethweintraub.com/SHORT_SALE_OFFER_STA
You shouldn't worry that the next door neighbor will bring down the value of your home. Because the short sale list price is way below home values in your area, so there's no way the bank will allow the low ball offer.
