This is a great way to save some money. I would, however, do a thorough inspection of the house. If you aren't comfortable doing a thorough inspection, you can probably get a home inspector to do it for you for around $300. Generally when the courts have passed judgment on a house, the title is clean. But, for safety, you should ask the bank for title insurance as part of the contract. We're just talking about a few hundred dollars on a house in that price range. When you do make your offer, do it as a business decision--leave the emotions out of it. After you've made a great deal and begin the remodeling phase, then you can "fall in love" with your new house. Don't feel like you have to offer the asking price. Remember, the bank is not in the real estate business. They would prefer that someone else, like you, own the house. I've bought 6 this way and so far nothing out of the ordinary has happened.

Bank owned properties are generally sold"as is" you will get an inspection period and can do a home inspection,however they will almost never do any repairs. if you are dissatisfied with the inspection you can cancel the contract but that's generally your only option. most foreclosures are in very poor condition that's why the low price. Often the previous owners are disgruntled with losing their homes & totally trash the place.
In short,you get what you pay for.