Short-Sale vs. Foreclosure: Which Should I Buy?

As a serious buyer, is it better for me to make an offer on a property that is listed as a short-sale or a property that is bank-owned?

For clarification, a short-sale is defined as a home in which the owners are facing problems making their mortgage payments and are negotiating with the lender to sell their home at a lower price than the outstanding mortgage. A short-sale property may be occupied by the owners or vacant.

On the other hand, a bank-owned home is one in which the owners have defaulted on their mortgage and the bank holding the mortgage has assumed ownership of the home. This home is vacant.

Here's the quick and dirty on submitting an offer. A short-sale is a catch-22. Even if the owner accepts the contract terms, the lender has the final word! But with a foreclosed home, at least you're dealing directly with the lender.

What about due diligence on condition? There are no guarantees here. Pay for a general building inspection even though you have no leverage to ask for repairs made by the owner/lender and be prepared for the worst. Also be aware that some owners may intentionally damage the property prior to their leaving.

If it seems too good to be true, maybe it is. That's the risk you face!