I have never purchased a short-sale. But I have been on the other end - I was the short-saler.
I had two lien holders on my property (I did an 80%/20% loan). The entire process took 3 months - but that was because I was very diligent in calling both lien holders on a repeated (i.e. daily) basis.
Each lien holder need about 15 - 20 documents (paycheck stubs, bank statements, letter of why I needed a short sale, tax files, etc.). Of course all this information had to be faxed to a generic number, so I ended sending this information multiple times because it always "wasn't in the file". And they always needed the most current information, so I kept having to update the documents I had sent in.
The first lien holder really couldn't approve anything until the second lien holder approved their portion of the deal. (If you have two loans a portion of the sale price goes to the first lien and a SMALL portion goes to the second lien). Once the second lien holder approved the deal, the first lien holder approved the deal in a matter of hours.
Of course my deal got approved by the lien holders at 4:45 PM on a Friday afternoon (8/27/2010). Per the agreement I had signed with the purchaser originally, I had to have this deal closed by on Tuesday morning (8/31/2010) - so I manic moving session that weekend. It is the closest I have ever come to a nervous breakdown.
So - lessons from my story:
1) Never do an 80%/20% loan - causes too many headaches!!
2) If you are the purchaser of a short sale - be patient - the seller probably is trying to get the deal accomplished as soon as possible. But it is usually out of their hands.
3) If you are the purchaser, do put a deadline in the agreement (or talk to your agent about it). If my deal hadn't been approved by 8/31/2010 my purchaser could have walked away from the deal with no recourse. And I would have been back a step one of finding a buyer.