These are hot topics in today's market but there are some key differences that buyers may wish to consider before deciding where to make their offer.

Decision makers:

Short sales buyers work with both the homeowner(s) & bank. While the bank has the final say on price, homeowners are still in charge of many provisions like closing dates, repairs etc.  With REO's the bank is the sole owner so there are fewer "cooks in the kitchen."

Motivation:

With short sales it's can be harder to know just how motivated & qualified the homeowner/seller is. That's because the bank alone decides whether the current owners can prove sufficient hardship to qualify for the short sale. The homeowner has options other than selling to you. They can give a deed in lieu to the bank if they intend to move out or declare bankruptcy to delay foreclosure proceedings.  With REO's the bank has already completed the foreclosure and wants to recover their mortgage loan money.

Timing:

Short sales generally cost the bank less money because fewer payments may be past due and they don't have the costs of obtaining a foreclosure judgment. It doesn't much matter what time of year you submit your short sale offer.  REO's have already incurred foreclosure costs. During the earlier part of the year, they may hold out trying to recover more of them.  Near the end of the year they are motivated to get REO's off their books so they don't have to record them on their financial statements.

Time till close:

Short sales can take months to close.  Banks tend to move slowly on reviewing your offer as they also have to analyze whether seller can prove sufficient hardship to warrant taking less than the full mortgage amount.  REO's need only look at your offer so there is less to review.  Depending on the time of year their reply may come quickly

Profit/Savings:

If the sellers are motivated (aggressive price) and qualified for a short sale by their bank, you may save more buying a short sale regardless of the time of year.  REO's tend to save more by waiting till year end.  It's not unusual for investors to compile a short list of desirable properties then wait to see which the banks are stuck with come year end.  If you intend to occupy the property you buy, it may be more difficult to accept buying whatever is left over.

www.GregZaccagni.com @ www.MortgageAdvisor.info