What do I need to know to buy this home?

I have so many questions. I found my dream home but it's got some issues. The builder/owner still owns the home but it is about to go into foreclosure but since she still owns it we had to write our offer to her but the bank has to accept the offer too. It has a tax lien on it. The tax lien was paid but the title has not been updated. The builder/owner sent all of the paperwork to the IRS and we are supposed to have a paper back from the IRS by Halloween. This paper, called a "Letter of intent" will say, "Since there is an offer on this home that bank and builder are both willing to except we are providing this paper that states there are no tax liens on this home anymore it just hasn't been recorded yet." This paper I have been told, will allow the builder/owner/bank etc. sell us the house. Also, we are preapproved. Will this cause a problem with our financing? Should this be the last step before they can formally except our offer? We are first time home buyers, so if we have the paper from the IRS will we be able to close by December 1st? My realtor said we could do a dry closing.. what is that?? If we do a dry closing by Dec. 1st will we be eligible for the tax credit? What I do know is that we do not have to pay back taxes-- Also, this is a short sale but the bank has already said they will take our offer as did the builder. Also the taxes on the home are 1800 annually and my realtor said I can file 2 different exemptions right away that will take them down to around 800 annually. Is this true? Also, the bank said they have been working with the builder to avoid foreclosure and they know what we are waiting on now but is it possible that in the next 30 days the bank will just say forget it and start the foreclosure process? and if that is what happens is it too late for us to get it by Dec. 1st? ANY information would be much appreciated. I really want this home so information on how to make this work by Dec. 1st is very much appreciated! Thanks so much.