Let's be quite frank about some of the other answers.

"As is" doesn't stop you getting an appraisal/inspection.

If you're going to get financing to purchase an FSBO/FC/REO then the financing company will want an /appraisalinspection.

You're taking the Realtor out of the picture so you'll need to make sure you know how to fill out a contract (available from a title company) and make sure you use a Title Company for the closing.

Finally it's not hard to do this just time consuming. There are plenty of good web wites out there that will steer you in the correct direction.

As a home buyer, I would also recommend using a Realtor whenever looking at foreclosures. We looked at some when we bought our home and our Realtor explained the extra risks to us. She explained that you are buying a piece of property that was relinquished by a possibly hostile owner who doesn't want to give up their home. Sometimes these people will do everything in their power to sabotage the bank and future buyers.

Also, a bank doesn't like to negotiate. You might have to pay the offered price and the bank will not pay for any repairs. In the case of a home we looked at, the previous homeowners had removed all of speakers built into the home, leaving gaping holes in the ceilings. Our Realtor told us about previous owners who had poured concrete into the pipes of the homes. This is something you might not discover until doing an Inspection, and often you have to buy a foreclosure 'as is,' without an inspection. This is something that the bank will not pay for. She warned us to buy well below our budget in case we had to do significant work to the home.

Just something to think about.

Halley,

I suppose there would be both benefits and drawbacks in every situation. It all depends on your criteria, and your willingness to work your way through the processes. I'm going to assume you're doing everything on your own, without the assistance of a REALTOR®? If you're not going to use a REALTOR®, I'd advise you to at least hire an attorney to represent you at closing. I've experienced SO many things that both banks and people have tried, that would have harmed the interests of the other party.

You'll certainly have more choices though. That's the benefit. The drawbacks are numerous, but can all be overcome if you're knowledgeable and savvy in the process.

Personally I don't see why you shouldn't expand your search -- it never hurts to have more options and whether they are FSBOs or foreclosures, they still offer you opportunities that you may never have come across otherwise.

However, there are its obvious upsides and then there are the downsides of purchasing FSBOs and foreclosures. With FSBOs it is difficult to say how the seller will react -- there is a chance, for example, that the seller is selling their home themselves because they do not like the opinion or feedback given by a Realtor. Perhaps the recommended listing price is too low and if that is the case, you will probably not be able to get much of a bargain out of them if they are fixed on a certain figure. Foreclosures are notoriously difficult just because of all the details and hidden expenses that are so elusive.

I don't know much about foreclosures so I wouldn't be able to expand on my opinion of that, but if you pair yourself up with an experienced Realtor, they should be able to guide you much better than I. But as a mortgage broker and a normal homebuyer myself, I would definitely expand my search -- there's no harm in a few more options. It might bring on a couple more headaches but it might just be worth it! Good luck in your search Halley!

Great question!

THE BENEFITS:
In a seller's market, you may run across a great deal because a seller did not get a fair estimation of value before selling. But, we are now in a buyer's market, so inexperienced sellers find that they are a great disadvantage from a marketing standpoint (who wants to keep spending money advertising a home in a down market.)

THE DRAWBACKS:
Inexperienced sellers who are not listed in numerous media outlets are missing out on buyers. I find that most sellers do not have the time necessary to properly market their own homes. This is especially true with condo owners who may not reside in their oceanfront condo for a few months at a time (second homes)

Be very, very careful in dealing with individual sellers without bringing your own REALTOR. You may not even know what forms consitute a legitimate sale, the pitfalls are many, so you should at least use a REALTOR to make offers to the home owner. REALTORS have a code of ethics that is available on the REALTOR.com website.

I myself make it a point to contact FSBO's and homeowners in foreclosure as a Real Estate Professional. I feel that it allows me a wider selection of properties for my buyers and myself to choose from. It also is very rewarding to help in anyway I can. Though as a buyer I would not recommend going to these types of sellers. Not being represented by a Real Estate Professional that can assist with the negotiating and the writing of the contracts is a recipe for disaster in my opinion.

The process for FSBOs is the same as for buying with an agent with the exception of all the Florida required disclosures necessary in Real Estate transactions. You need to learn what those are and how to protect yourself. You need to know what to request of the seller and who is paying for what. Keep in mind, most FSBOs have a built in sales commission knowing that 75% of them are sold by Realtors. Foreclosures are a different subject. You need to be savvy in this field or learn from someone who knows.