There are some pitfalls in purchasing a short sale or REO property which are mostly to do with condition, repairs and the "as is" terms on these properties. Regardless of condition these are usually a good buy however if work needed is extensive and you or spouse or family aren't capable of doing the work then it can get very costly. This is a good time to buy and there are good deals even with "arms length" transactions.
The process can vary and especially will vary from state to state. My suggestion is that you find a realtor who is familiar with selling these types of properties in the area where you want to buy and he/she can explain the process to you. Good luck.... more
It really does not matter what was owed but what the current asking price is and how it relates to the current market. And although banks are not in the business of selling real estate they are still looking to sell for the right price.
Saying that, I still would not hesitate making an offer and seeing where it takes you. They do negotiate and will look at offers, whcih also includes contingencies in the contract (mtg, closing date, etc.). I can tell you that you will also need to be ready to talk. Their first counter-offer will be very close to the asking price. Do not get upset, come back with your counter and keep working it until either they stop or you decide that your offer is as high as you want it to go without you regretting its purchase at a higher price.... more