A new article at bankrate.com tackles the question from a buyers perspective. In 2011, both short sales and foreclosures make up over 40% of the market sales so if you are trying to buy a home for occupation or investment, you are likely going to run into one of these types of sellers.
Foreclosures offer faster closings, and more negotiation opportunities. They also have been vacant for a period of time that might exceed a year or more. The effects of being vacant this long are often combined with a poor condition left by the last owner, making the foreclosure a project with possible hidden surprises.
Short sales are often still occupied and the occupant is still trying to maintain the property. If a buyer is not wanting a potential project, short sales are the better alternative. Yet, short sales have many more hurdles to the sale process. Making an offer, and receiving a response can offer a different level of frustration and delay. Negotiations may be very limited. Approvals and closings can drag on.
Every day I see agents showing foreclosures to buyers who probably have no business purchasing a foreclosure. Similarly, I witness the buyer who needs a home in 30 days being shown short sales by their agents. Short sales and foreclosures are so much a part of the real estate world today that buyers believe they need to get in on the opportunity in order to save the most money. It is really important agents help buyers understand the challenges and benefits of both types of properties. This bankrate.com article is a good piece to send to buyers before starting the process of showing homes.