As a Realtor I get asked this question often and I have to say, speaking from my experience, your best buys will be bank owned properties and here's why.
It's not uncommon to wait for what seems like an eternity for a response from the lender fro a short sale, and often the selling agent has very little or no control over the outcome and that can be frustrating for all parties involoved. The best purchases for the money are bank owned properties. With your knowledgable agent at your side you can get a home for a good value. Of course in all cases it is best to make sure your financing information is accurate and that you are working within your means.
With that said it doesnt mean that you can low ball on bank owned properties, it really depends on the market and what condition the home is in.