I'll never buy a house that isn't an investment again. Buying at market value and paying interest with no equity for the first two years sucks. Some of them will take some work before move in, but put yourself in the situation to do that.
We bought bank owned 3 years ago (when there were lots), because we loved the neighborhood.
Paid $174k, pretty much replaced the entire interior myself, and finishing the basement. We'll have about $30k in renovation the end. A house directly across the Ravine from us, slightly less square footage, fewer updates, just sold for $312k. Feeling pretty good.
Oh, the most important thing. Can your wife live through a remodel??