Short sales can be the market as can REO properties. I agree with Todd on this one. I've seen short sales overappraised because the appraiser is ignoring REO and short sale properties that sold in the market, and I've seen privately owned sales underappraised because the appraiser is relying on REO and short sale properties when there are recent, in market, competitive private sales available that sold higher due to a market preference for non-Bank influenced sales.
Every market is so different when it comes to this though. Taking a course is good; but also nose to the grindstone and talking to agents and other market participants, and reading time on market, and the nature of a particular short sale or REO is essential.
In my markets most REO and short sales are arms length sales and reflect conditions within a market. The question is, Which market? Sometimes they are in their own market, sometimes they set the lower end of an overall market area, and other times they are the market period.