Here is a nice run down on pro & cons regarding purchasing new construction or looking for that
deal of a life time in distressed property land.  I agree that a deal can be found working with
sellers or banks that need to move a property fast - but the buyer should always beware - if a deal
is too good to be true it probably is.

Bank owned (REO’s) foreclosed or short sale (SS’s) homes can be had at bargain-basement
prices, but foreclosures typically include: 
Lack of maintenance and care throughout the property;
Multiple offers and uncertain closing dates;
Distressed properties in surrounding areas; 
“As Is” purchases.
 Used and worn finishes, faded, torn and stained carpeting, poor painting, one coat stucco
systems, old roofing materials; cracked tile and formica, etc;
Poor return on equity as the market improves; 
Poor energy efficient appliances, insulation, and heating and cooling systems which will add to
monthly maintenance and utility costs.
Shoppers should see value in a new home that they can't find in an existing home:
 
New homes provide fit and finish warranties by the Builder;
New construction techniques, new plumbing system, new electrical system, new technology
systems;
New homes finishes are perfect, no carpet stains, no poor painting, etc.;
New homes can typically provide customized finishes i.e. floor coverings, countertops, paint
colors, etc.;
Now homes will provide a safer structure to reside in resistant to earthquakes and storm events;
New homes will appreciate at a greater pace than older used homes upon market recovery; 
New homes typically provide automatic irrigation systems; 
New homes will exhibit a stronger property tax to equity and sales value basis upon market
recovery;
New homes will provide the Buyer accurate closing schedules;
New homes exhibit modern electrical systems, modern plumbing systems, modern structured
wired systems, etc.
New homes will provide significant efficiency in Title 24 energy savings for heating, cooling and
lighting systems that are guaranteed to save the homebuyer money every month.
 
This is not to say that you can't find a newer home in distressed property land - you can, but
people who are losing their home are the necessarily keeping the property in tip top shape.