Generally speaking a short sale is a better purchase than a foreclosure.  The reason for this is that they are priced very similar, but short sale homes are usually in better condition.  In addition to this when you buy a short sale you are helping the previous homeowner prevent foreclosure, which will stop any detrimental effects to their credit.  When buying a foreclosed home, one can expect many faults with the property.  The only downside to purchasing a short sale home is that you will have to wait for a while until the bank approves your offer.  Believe me the wait is well worth the equity you will gain in the investment.