Less than half, 47%, of those questioned said they would consider buying a foreclosed property, down from 54% seven months ago, the study reveals.
Most said they were concerned about the negative aspects of buying a foreclosed property which included hidden costs and falling values.
Those who are interested in buying a foreclosed property want a heavy discount, according to the survey by real estate search engine Trulia.com and Realty Trac, the leading US xx tracking default notices, auction sales and bank repossessions.
Three quarters of those who responded said they would want at least a 25% discount and a three in ten wanted at least 50% off the price.
'Just as the market is being flooded with more foreclosures, home buyers are more hesitant to buy them,' said Pete Flint, chief executive of Trulia.com.
He also pointed out that the survey shows there are a lot of myths about buying a foreclosed property. 'Misinformation around foreclosures abounds, and that's dangerous for the market and for home buyers,' he said.
The study is published at a time when house prices are plunging overall in the US, making buying a property unattractive to investors, thus drying up a potential pool of people who might buy.
The problem is expected to get worse. According to the National Real Estate Association 45% of all homes sold in October were short sales, that is property that sold for less than the amount owed to the bank holding the mortgage.
Forecasters are expecting the number of foreclosures to continue rising. Banks are predicting that 2.25 million properties will have been foreclosed this year.
