Short sale is a great way to pick up a property. Depending upon the area, the better buy can be made by going after an REO - i.e. the one which bank has already taken back. In a short sale, the buyer and seller enter into a normal purchase/sale contract. The seller accepts the offer (even though it is less than what he owes to the bank).

The bank goes through their standard process.

 First thing they look for is if the seller is already in default. If yes, they will look at the short sale. If the seller is not in default, most likely they will reject the short sale.....with the current heightened financial fiasco, they may look at any and all short sales.

Next thing they look for is how long the seller has tried to sell the property. The longer it has been on the market, better the chances that they will entertain the short sale.

Lastly, they will order their own appraisal in this situation. Once they have good assessment of the value, they have their internal criteria as to if the short sale is within a certain price range of the appraisal, the first line can approve the sale. If the price is discounted more than that range, then it goes to higher levels of approvals. This is where the delays are caused and you may not know whether you have the deal or not......If you go after REO property, all of this red tape has already taken place and the sale can be much faster.....

But, from the buyer point of view, there is no difference other than the fact that you have a contingent contract

~Gail Gail's Site