I wouldn't rule it out. But I would be very cautious. You need to check for things like back taxes owned on the property. Also there is high degree of probablity the property may have been neglected by the previous owners. At one point banks were actually paying borrowers who were in default money to leave without destroying the home. Chances are someone who was foreclosed on wasn't likely worried about whether or not the septic tank was full and backing up. Things like that. To my knowledge I don't think you can generally have an engineer inspect the home before you bid. But I could be wrong on that one.
There can be opportuities in the forclosure market. Depending on where you live though, this can also be a curupt and difficult market to access. Often in forclosures and even short sales, the bank will appoint a realtor that they work with regularly. They then intend to sell the property to a developer or contractor they know at a deeper discount then the market would even demand. The developer fixes up the home, sells it and splits the profits with the realtor under the table. Often the bank is getting screwed and is simply to busy to care.
I went through this myself tryng to buy a condo in a shortsale a few years back. The realtor refused to accept my bid. I attempted to contact the bank to make them aware of it. It was basically impossible to find anyone who would even follow up with me. I eventually decided it wasn't worth my time to persue it.