What's the difference between a short sale and a foreclosure? That's like choosing between a rock and a hard place! But both terms relate to homes that ultimately need to be sold. In a short sale, someone sells his property for a sum that's much less than what he still owes. In foreclosure, the lender wrests control from the seller and puts it up for sale.

It's not really a pretty picture either way, but there are deals to be had for the smart buyer. Here's what to watch out for:

The real estate agent handling your offer should have hands-on experience with short sales. This means actual short sales accomplished, not just time spent in a class.

Some sellers think they can short sell the home and they set a ridiculously low price that will never pass muster with the lender. That's why the seller's agent as well as your own should be experienced in this process. Sometimes inexpert agents give poor advice to the sellers on setting the price.

Find out if the seller has become pre-qualified to do the short sale. The lender must be convinced that the seller is experiencing sufficient hardship to justify the process. Short sales generally happen when a home is in the first stage of foreclosure. Don't get excited about a prospective short sale if the sellers haven't documented hardship to the bank.

Ask about the neighborhood values in general. That's especially important in these days of revised real estate valuations. If the seller acquired the home and then its value fell, the current short sale price might just put it in line with its current worth. You might not be buying into as much equity as you think.

A short sale can take from four to six months or even longer to go through. This depends on a number of factors. Does the seller owe money to a lot of lien holders? Has the seller built up enough equity to eliminate the private mortgage insurer in this transaction? It takes time for everyone involved to get their end of it worked out. Remember that the bank, or the lender, is the one you're really negotiating with, not the seller or his agent.

Ask about current home inspections. If the seller has been short of money, it's possible he has let the house's condition deteriorate. In a short sale, the lenders will not order inspectors' reports and certifications. Check for pests, roof condition, foundation, electrical, plumbing, and everything you would normally look at in a regular sale.

Besides ensuring that the home is in good condition, consider the costs of these reports. These will not be listed at the closing. You will probably end up paying them as well as transfer taxes or any other extras.

Lenders often change the rules at the last minute. And sellers aren't motivated because the whole process really bogs them down. Don't expect lots of last-minute cooperation. Just remain patient. If your short sale offer isn't accepted, there's a chance you'll be bidding at the foreclosure auction.

The foreclosure is also a lengthy process, but the buyer generally steps into it when the process is nearing its end. So from your standpoint, buying foreclosed or real estate owned (REO) homes will be quicker.