You lose control of the situation once the seller goes into default. The bank could refuse your offer(s), could decide not to work with the agent selected by the seller, could get Broker Price Opinions that are not realistic, and/or could decide to go ahead and foreclose. I'm not emotionally attached to houses, so I look for a price that is favorable to me wherever we are in the process. If the house goes to short sale or foreclosure and I don't get it, tough. If you can take that approach, then make an offer now, if the seller refuses it, wait for the short sale or foreclosure.
In many markets short sales are priced below market to attract offers and get the ball rolling. The bank will often counter, the first buyer drops out, and the list price goes up to what the bank will accept. In some markets foreclosures and short sales end up selling for full retail value, despite being sold as is.