There are alot of Pros and Cons in buying Foreclosures. My brother and I buy foreclosures (REOs) in California. The biggest con is the condition of the property. The property is in bad shape and needs lots of TLC. The bank will be selling the property "As Is". That means you buy the good and the bad. We always try to get an inspection period to check the property out. Sometimes we get it sometimes we don't. You have to evaluate each property and the profit potential to see if you will move on the deal. Now we are investors so we are buying way under market to sell to someone else. And that brings up the next con: property value. Usually their are not a lot of houses selling in the area where we are buying REOs. This makes it hard establish the "After Repair Value" (ARV) of the property. The ARV is what the house would sell for at retail when it is all fixed up. We actually look at the past years values; like what were houses selling for 3 -4 years ago. We do not think the market, even in the Central Valley of California, will sink below those values.
Now the Pros; you can get a great house, that needs work, for a greatly reduced price. Prices will recover in the next year or two and you can have that equity just waiting for you. I recommend (3) things: 1) Look for REOs that have been on the market at least 60 days in a mature area; 2)have the property inspected to develop a scope of work for repairs; 3) Have a licensed contractor give you and estimate on the repairs and subtracted from the ARV along with a hassle fee for your time to fix-up (10 - 15%) the property. You will have to make a lot of offers to one accepted but that one will be on your terms and will pay-off in the end. Good Luck.