Hi Eileen,
Great question! Currently, some of the best bargains are bank-owned homes, but my advice is to also consider regular sellers who must sell for some reason (job relocation, financial distres, divorce, death...). The quality homes in the under $400,000 price range sell quickly, because right now many people are looking for a bargain. The last such home got multiple offers within days, so you would do well to work with an agent who is aware of upcoming listings in this area and who can help you recognize value and quality. I live and work here in Boulder Creek, and agree with Curt that you'll want to work with someone familiar with the complexities of rural properties (septic systems, water sources, property boundaries, etc.) as well as the variety of construction quality in our housing, not to mention the subtle differences in neighborhoods. Feel free to contact me with any questions! Best wishes, M.C.

Eileen, Curt Abramson from Bailey Properties in Santa Cruz here. There are sometimes decent homes in the Boulder Creek area in your price range, and we expect there will continue to be new ones listed through the spring and summer. Keep in mind that some of the homes in the area were built as cabins or summer homes, and quality and sturdiness can be an issue.
My recommendation is to seek a Realtor that knows the area and its pitfalls, and work with them. I use a web-based system that e-mails my clients new properties that fit their needs as soon as they hit the market. It's proven very effective at getting a jump-start when good values come to the market. Let me know if I can answer any other questions for you.