Based on my experience, you should not assume anything with a short sale until the offer has been accepted and funding has been approved (all documents have been signed). If you are the selling party during the short sale process, you should never assume anything until it is completed. Although you think you might be helping the buyer out by letting them move in early and get work done, there is always a chance your lender will reject the buyer’s offer and you don’t want to be in a position where the buyer is looking to you for compensation for money they spent on the property they will not own.
You are also running the risk the buyers will have work done on the property and then not pay for it, exposing the property to potential mechanic liens.
In the case you really trust the buyer and want to help him out, you may be able to have a good real estate attorney draft an agreement between you and the buyers to limit your liability exposure on some of these issues, but it would clearly be safer for you to make your buyers wait to make repairs or improvement until after they actually own the property. With the improving real estate market, short sales are taking longer for bank approval because the banks are making sure they are getting the what they deserve for the property. Any questions regarding a similar situation feel free to reach out and contact me.