Buyes should be open to all options when it comes to purchasing a home. Foreclosures are not always the best deal. Sometimes it can be a short sale or part of an estate or even a divorce.
Over the last several months I have been showing a lot of houses. Ninety-One homes in 60 days to be exact. Probably 70% of the homes I am showing are owned by "Institutional Sellers", banks, Fannie Mae, and HUD.
Many buyers think that these homes are a bargain. It makes sense, you would imagine that they could buy a distressed home for a big discount. Unfortunately that's not how the institutions see it. I have found that these institutions want to hold to their prices despite the condition of their houses. They take a long time to respond and work multiple offers simultaneously.
When one of my buyers got frustrated that HUD would not discount a home for the condition, I told him this: "Imagine you're asking an ATM for a loan. It's a machine. It doesn't care how much you may need or deserve the loan. It only know how much it can give you." The institutions are machines. They look at the numbers and hold out for what they want.
My personal opinion is that it is still better to buy a home from an individual seller who actually wants you to buy their home, who often discount their price to meet the distressed homes, and who offer compensation for repairs. They provide seller's disclosure and often stage the home so it looks presentable. So think about it before you make a purchase that seems penny wise but ends up being pound foolish.