I would encourage you to include FSBO's, foreclosures and short sales in your search. The best buys, though, often come from motivated sellers who have adequate equity to price their homes even more aggressively than the debt-burdened properties. You may be interested in this article about what could be the best real estate buy of all:
The single biggest drawback regarding searches for FSBO and foreclosure can be the lack of representation and guidance the home receives. Many time this can lead to improper pricing of the property and lack of critical disclosures. The buying process can be very dangerous with both FSBO and foreclosures if you are missing representation that will prevent you from making huge mistakes.