Real Estate - Can we talk short-sales?

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I wish we had the luxury to just say forget this one, but it's in our budget (barely), in the area we want and has everything on our checklist. Everything else is either too much money, too little house or too far away from where we are looking. We've got a solid 4 months, 120 days.

I'm leaning toward putting in an offer, with a very small amount of earnest money and just keep looking. Worst case, we withdrawal the offer and lose it.