Our advice is to becareful with the assumption that because you are dealing with a "foreclosure" it is acceptable to make an offer under the asking price.
The reality of the situation is there are locations that offers are commonly coming in above the bank's asking price.
Your best course of action is to work closely with a local real estate professional that has a feel for this form of market activity and can advise you about making a valid offer.
You have some great answers from Christopher. If I might offer a slightly different angle on this...I'd say the bigger picture is that to effectively negotiate on a foreclosure or bank-owned property, you need to work with an experienced buyers' agent and get an in-depth knowledge of the "market" for the area you're looking, and the type of property you're interested in. I've been working with many buyers on Kauai that start out thinking that they want a "foreclosure" because we all assume that's the best value. However, there are many other listings that offer as good or better negotiating opportunities and perhaps a better property for the same price. Sometimes, with a foreclosure, you're buying someone else's problem. As an example, in Princeville there have been a few homes that are bank owned, but when you research them locally you find that one of the reasons they went to foreclosure is that they are located next to a busy road and were difficult to sell. So, although it might appear to be a value - will you have the same problem when you go to sell? A good buyers' agent will help you sort through the various opportunities and help you find a motivated seller, bank or not :)
Good luck negotiating!
Susanna Kunkel, RA
Hawaii LIfe Real Estate Services
Kauai County, HI
First off it is important to explain the difference between a "foreclosure" and "bank owned". A lot of times these terms are interchanged(even by real estate agents) but they are quite different.
A Foreclosure is a house where the owner has defaulted on the terms of their mortgage and as a result the mortgage holder is going through the process of foreclosing on a property and is holding a foreclosure sale or auction on a specific date. At this foreclosure sale you can buy the property, but you buy the property and all the liens, tenants, and anything else that comes with it.
If nobody purchases the property at this auction, then the bank must buy the property back. Now it becomes a "bank owned" property. Purchasing a "bank owned" property from here is not much different than a conventional sale, other than a delay in the bank accepting your offer. The bank will be getting constant broker price opinions and should be very aware of the current market value of their asset.
So to answer your original question, you should work with your buyer agent to determine a pricing strategy and what you should offer. Sometimes you see bank owned properties that sell for more than asking price, sometimes you will see it sell for 15% under asking, it really depends on the property.
As for the second part of your question. After accepting the offer, if the bank foreclosed properly, their is nothing to say you can't close in a normal 30-45 days. If promblems arise, it could be delayed.
I know it took a little while to get to the answer, but I hope I helped.