AWESOME answers by all, but let me explain why most of the banks don't "get real" and reduce their prices on highlyy over priced properties.
It has to do with legalities mostly, and money secondarily. It costs a bank somewhere between $35K to over $100K to foreclose. This includes hiring the overpriced atty to do the paperwork, file courthouse papers, pay the taxes and insurance on their collateral, and when it's all said and done, they foreclose. NOW... they have to put it for sale with an agent, pay the agent and still carry the costs of the taxes, insurance, etc.
In addition to that, this is what the Feds call a "non performing asset". The Feds have rules about that. If you have a certain percentage of NPA, they will not loan the bank any more money to make loans to people, and THIS is where the banks make their money.
In addition to THAT, IF the bank sells the property for less than market value, they must give the overage back to the foreclosed upon seller. So they have to make sure they've tried long and hard enough to prove they couldn't get the price before taking on the liability of making it look like they snaked the seller.
So... when it is all said and done, the banks really want to dump these properties asap, but the laws, regulation and government stand in the way.
Hope this enlightens all to the realities of the foreclosure market, and as has been said here already, a great agent can negotiate a great deal for you, and that may not very well be a foreclosure - although the media is hyping it up and making it look like they are just 'giving properties away' for pennies on the dollar, and that doesn't help either.