what are the risks of buying a short sale or foreclosure property?

With respect to a short sale the biggest risk is that your offer is not accepted by the homeowners lender. This may come after waiting a few months for a response. Otherwise the risk is the same as buying a home in a traditional sale. In Massachusetts, the risks with either a short sale or foreclosure is that there may be deferred maintenance and a lot of repairs need to be made to the property. As the seller does not have funds to make repairs you are buying the home in as-is condition. The same can be said with a bank owned property although you can often get a bank to make a concession on the purchase price or be able to negotiate a credit at closing. If you are considering a foreclosure auction I would not suggest this for anyone but an investor as you are not usually allowed to inspect the home prior to bidding and there can be some serious issues with these properties, stripped kitchens, stripped plumbing, mold, water damage etc. In a bank owned sale you need to be able to move quickly and be prepared to close within 60 days. Most often you are competing with investors who are cash buyers which is attractive to banks. Lastly, I would suggest that you only work with an agent that understands the short sale process and the risks of bank owned properties. A good agent will be able to save you tens of thousands of dollars.