The only way you're going to get a home actually worth $4.5-5m for only $3-3.5m, is if it's a real fixer upper.
Think about this: If the property were a short sale (not too many in this price range), the bank will still send out 1-3 appraisers to make sure they're netting the maximum they can to cover their losses. The home will likely be in better shape than an REO though.
REO property: Again, the bank's asset manager, prior to putting the home on the market for sale will also be obtaining appraisals, they will price it less than market, but chances are if the owner was going under in this price range, they probably lost at a MINIMUM $500-1m from their original down payment & have probably stripped the place, so you'll have missing light fixtures, kitchen cabinets, appliances, sinks, toilets, possibly tubs, staircase railings, garage door openers, heck maybe the entire garage door! etc)
The real deal on an REO like this is if you were able to pick it up at the actual auction, but then you will need to pay ALL CASH & make sure to investigate other liens that may be against the property. If you don't know a lot about foreclosures you should go to a few of these & just watch. Bear in mind you're going to up against other investors who make this their full time business & have staff to investigate each property.
In this economy, someone willing to lose 30% in this price range has got to be some fire sale of sorts, maybe a probate or trust sale. Even then, if you were heir to the throne would you say "ahh, what's another million, let's just dump it"
Your journey to find the pot of gold will be tough. There aren't many stupid sellers with $5m homes in great shape willing to sell for $3.5M. Even the soon to be Ex wants their full share plus your trousers & the shirt off your back!
When you're ready to float on down to reality-land, let me know. I do know of some homes that are not on the market. They all have defaulting owners.