Yes, agents receive commission on foreclosures, but I don't think that fear of being paid is the reason your agent may be steering you away from foreclosures.
Generally speaking, banks impose greater requirements on buyers of their properties. For example, here's some of the list of restrictions I've seen from California foreclosure homes:
1. No FHA loans
2. 10% Required Earnest Money Down Payment
3. Proof of Funds for Down Payment (in other words, money has to be "in the bank" at the time of the offer)
4. Letter from a direct lender (not a preapproval letter from a broker, but one from the lender)
5. Use of the bank's lending agent for prequalification
6. Copy of FICO scores
7. As is purchase
8. No reductions in price due to lower appraisal
9. All repairs to be done by buyer BEFORE close of escrow.
In addition, banks often "shove" costs normally paid by the seller directly into the checkbook of the prospective buyer. So it's not uncommon for buyers of foreclosure properties to have to pay for these expenses, all of which are normally paid for by the seller:
1. Natural hazard report, CLUE report, environmental report (approx $400)
2. Termite report, and section 1 repairs (approx $200)
3. County and City Transfer Taxes (varies depending on county and city, but can total several thousand dollars)
4. Title Costs and Title Insurance (varies according to price of home but $2000 is a safe number)
5. Escrow Fees (varies according to price of home; $1500 is a safe number)
6. Notary Fees (about $400)
7. Home Warranty fees (about $400)
8. Any repairs deemed necessary by lender (could be thousands)
For most first-time buyers with limited funds, buying a foreclosure property may be more cash intensive than the buyer can afford. Since your realtor is able to check the "submission requirements" for the foreclosure property, some or many of the restrictions I've stated above may be required of the buyers. However, your Realtor should be able to justify--when you ask her--why she does not feel a foreclosure property would be a good one for you!
Grace Morioka, SRES, e-Pro
Area Pro Realty