Great question. REOs (Real Estate Owned) have become a very hot topic of late and with good reason. They have become so prevalent, if you don't know what they are or how they differ from a traditional listing, it can be a very frustrating process.
The short answer is that generally speaking the amount they loaned or lost from the original buyer has very little to do with whtat they will sell it for. It may have an impact on the original list price, but eventually will typically bring it back down to a reasonable market price. Generally speaking they are the least flexible during the first 30 days of the listing. After that many will do systematic reductions to the listing price after so many days on the market or a specified number of showings or offers or the like. EVERY LENDER IS DIFFERENT!
By and large the bank has some type of property valuation done (BPO = Brokers Price Opinion, Appraisal, Automatic Valuation, etc.) to determine the Fair Market Value (FMV) of the property. Different lenders use different types, but the key is, they all have the value of the property determined by some method. Once that value is determined they typically list the property in that price range regardless of the amount that was previously owed. Some list properties aggressively to try to sell quick. Others will list it based on awful or inflated values and can sit for a LONG time!
Banks, unlike individual owners, have a very mechanized approach to selling real estate. It is almost a completely numbers drinen system which requires very little "thought" and their part. Typically they will hold fairly close to their original list price (for approximately 30 days). They did pay someone to give them an opinion of the actual market value after all. But many BPOs are done without access to the inside of the home, and that can mean the difference between a house's actual market value being $300,000 and being $100,000.
Nearly anytime a bank is involved in the deal, it will take a bit longer to get things done, but many times it is worth the wait.
There is one other tidbit that can factor into their price. PMI companies insure a property to protect the e
I hope you found this information helpful. If I can be of any further assistance, let me know. I'd be happy to help if I can or get you in touch with someone in your immediate area to help you through this.