I was corresponding with a colleague in Nevada, about a week ago and the subject came up about bank owned homes and their auctions. Since these type of sales are a part of the market we are presently experiencing, it seems only appropriate to clarify how foreclosure properties get sold.
As it was explained to me, "the auction is not an "absolute" auction - the high bidder merely earns the right to have their offer "considered" by the bank/owner under no obligation to accept."
Those words were "eye-opening" to me as well, because I had
been through my share of "waiting for offer responses" from banks and listing agents that represented them, that made a whole lot more sense after I read those words, "under no obligation to accept".

This happens quite often these days, when there is a short sale involved and also with bank owned homes. A buyer may make an offer on a short sale or foreclosed home, but the bank vs. a distressed seller - usually has the luxury of waiting for a stronger buyer with a reasonable offer. Again, they are "under no obligation to accept" a lowball offer.  I personally bought a foreclosed home in our last declining market over 10 years ago and this is exactly the type of experience we had, waiting for our offer to be accepted. How quickly I had forgotten about the waiting game.

I have also been told by some bargain hunters that have actually gone to the "auction" on the courthouse steps hoping for a foreclosed deal, only to find out that they needed "all cash" to purchase those bank owned homes. This is not to be mistaken with the foreclosed homes "listed" with agents after they don't sell at the courthouse, as those surely will require some sort of financing later.

So, that bears the question I recently asked a buyer - "if you had a choice between a home that needs some "work" that is priced "less than the market" value or a home that was priced "at the market" value and it was ready to move in, which home would you choose?
The reply for this buyer was, that they would rather pay market price and have a home all ready to move into. I suspect most of us feel this way; unfortunately we all have our own views of what we feel the market has for us and what concessions we are willing to make.
This is exactly what surprises me about today's mindset. The assumption that many buyers would like a good deal, but they expect that "move-in" condition, also.
Logically though, even in the market we're in, the homes that are selling quickly are a combination of both of those qualities and truthfully speaking, there's not a large inventory of those kind of homes.
We all would like a home in good condition at a bargain price, but it is not as plentiful as the media portrays.  If you're an active home shopper, you will soon find out that, that home (the one priced well and in great condtion) almost always has more competing offers on it than we care to admit - just because of these two conditions.

This brings me to my final conclusion, that if you are a serious home buyer and you expect to find a good home in nice condition at a competitive price, you really need to be prepared to make an offer when you begin your homesearch and I can't stress enough how important it is to have a pre-approval letter from your lender when you start the home shopping process.
If you believe you don't need to talk to a lender, you may not realize how much in closing costs, property taxes, and insurance you will actually need to purchase the home you really want, much less what your monthly payment will be and then all the time you had spent looking for a home was just a big waste of your time.

After all, it only makes good common sense for a seller to choose a buyer that comes prepared to make them a serious offer with a preapproval letter vs. a buyer who had not even thought of what they could afford before making their offer.

This brings me to a more recent conversation I had with a lender regarding credit scores, down payments and work experience - when going through the loan approval process.  Because of the subprime market downfall, the mortgage industry is under great pressure to make solid loans, so they are going back to basics - which means that the higher your fico score (680 is minimal today), the more funds you have (5-10% of the purchase price is a big help) and the longer you've been at your present line of work (2+ years would be ideal), the better off you are. 
If you are lacking in any of these areas, it's better to find out before you start looking, than after you have your heart set on a home you can't purchase.