Regardless of who owns the home, if it has been foreclosed, the lender/servicer is going to market the home at what they consider "fair market value". Many of them will reduce the price about every 3 weeks until it sells.
As for the ppf, the larger the home the less per square foot in most circumstances. But remember, that would be if you are comparing apples to apples....both apples are on the same tree and in the same field.
Reason is that you will only have one kitchen, many times the same number of bathrooms, one lot, one driveway, one garage, etc. Each of those variables, as well as others, dictate price that is specific to that improvement regardless of the total square footage in the home.
Hope this helps.