The bank is getting bids on the repairs. They are looking to redo the paint to remove some of that "pepto bismol" and green slime colors off the walls, new carpet and new vinyl in the kitchen.
Even after those repairs, they won't relist it for more than previously.
It can go both ways. If the home was in bad condition during the initial listing period and the bank does repairs, the price may go up. Also if it was listed as a short sale, the listing price can really be anything. I've seen some pretty agressive prices on short sales, but that doesn't mean the price will be accepted by the bank. The seller can sign for any price they want on a short sale, but the whole deal is dependant on getting the lien holder or bank to sign off on the deal.
Normally I see prices go down a bit though. Normally the sellers can't take a hit on the price so they have to list it for enough to pay off the loan and their closing costs and fees. Sometimes that is above market value. If it is then likely the bank or lender will list for a lower price after foreclosure.
There are lots of variations and each deal is different so it's tough to say with 100% accuracy.
In other cases, though, the owners won't go through that whole process of attempted sale. They may have talked to a Realtor who provided a CMA showing the price drop, and the owners may simply have stopped making mortgage payments. So you don't have that pricing history.
And maybe when the market strengthens, it could be possible to see a house actually put on the market for more than had been asked for it pre-foreclosure. But, in today's market, generally the price of a foreclosed home will be lower than what was asked pre-foreclosure.