Foreclosures - AKA, REO, Bank Owned, Lender Owned, Real Estate Owned, negative equity, distressed properties, and upside-down properties.
The best candidates for buying a foreclosure are cash buyers with extra cash to fix repairs. Usually referred to as "investors".
Buying a foreclosure for a primary residence is not a terrible idea, just make sure your agent knows what they're doing. Always have ALL the inspections completed, always make your purchase contingent on your needs and bottom line, not the bank's.
The foreclosure market is not what it was in 2008-2013. Markets with 69% negative equity no longer exist. Phoenix, AZ had the 4th worst upside down market in the nation in 2010. My own hometown had the 5th worst. My home town had a 55% negative equity market. Meaning 55% of the homes for sale were bank owned. Meaning if 1000 homes were on the market, 550 were foreclosures. Meaning... that was the market.
No one could sell a regular house without 5 comparable sales belonging to foreclosures readjusting their sale price. Attempting to explain that to a homeowner was almost impossible. "My home isn't worth anything anymore because 5 people quit paying their mortgage???"
So, as of mid 2013 into 2014, that is no longer the case. The market for foreclosures is about 4% in my town now. The availability of purchasing a foreclosure as a consumer is almost nothing unless you have the cash to compete with investors with deep pockets. If you do find a great deal with no one else bidding on it, do your complete research on the home. Talk to neighbors, talk to the previous owners, talk to a Realtor who works that area specifically.
I hate to draw a bad analogy, but foreclosures are like abandoned, abused children. It should never happen, but it does. Unfortunately the real issues may not become apparent until years later, after it's too late.