When banks have already foreclosed on the properties and placed them for sale, they are typically called bank owned or REOs. REOS are usually listed thru a designated real estate agent and the MLS, so you can go thru your agent to make bids on these listings.
Unless the property has significant condition issues, banks are now pricing their REO listings at or even above current market prices, so they are no longer the bargains they once were.
Buying REOs also provides for some risk to the buyer. While you will probably write your offer on a standard purchase contract form, the banks almost always counter back with their own addendums that change a good portion of the contract terms. They typically do not allow any changes to their counteroffers -- accept their terms or move on to another property. I always recommend to buyers that they should have a real estate attorney look over the bank's terms and make sure they understand those terms before signing. REOs are typically sold "as is." You can have inspections of the property but the bank will not make repairs. You will be required to provide proof of funds up front, when submitting your offer.
You as a buyer should not assume that title to the REO property will be "clean" once the property has passed through foreclosure. While it is true that a foreclosure sale will wipe out subordinate liens and the bulk of any problems caused by former owners of the property, it may not extinguish liens of ad valorem taxes or problems that may have been missed when the previous owner bought the property. Banks typically transfer the properties to buyers through a special warranty deed, which limits their liability. They will give you an insurable title but not necessarily a marketable title - there is a difference. It's in your best interest to have your own real estate attorney review the title work before closing.
Condition of the property is often an issue with REOs as with the auction properties I mentioned above. Lack of utilities (AC) and maintenance do eventually take a toll on FL homes. Some banks have asset management companies come in and "freshen" up the properties, usually with paint and floor coverings and appliances. Other's don't. When buying an REO you will get the opportunity to do inspections during the specified time period to determine if you want to go forward with the purchase or cancel.
There's no rule of thumb on what the bank's bottom line is on price. Just as with any other real-estate purchase, you have to look at the recent sales prices of comparable properties, or "comps." You should look at the comps based on current market conditions and write a competitive offer based on that. Sometimes the bank prices the homes really low, and the home will have multiple offers over list price within hours. Sometimes it's priced too high, and you can make a lower offer. Your agent should be able to provide you with comparable sales before you write up an offer on a REO property.
You may find that one FSBO that is under priced for today's market but those are getting rare as many homeowners access the various real estate web sites to check values and sold comps before pricing their properties. Often FSBOs are that because they have interviewed one or two agents and the owners disagreed with the suggested list prices they were given, thinking their property is worth more than what the agents comps suggest.
In today's market the better deals are often either (1) properties that were overpriced for whatever reason when listed that have now been on the market over 90 days & the owners are now getting anxious or (2) new listings where the sellers are motivated to get a contract and close quickly.
Whatever type of property for sale that you decide to pursue, you should have your financials lined up before starting your home search. If paying cash, you will want a Proof of Funds letter ready to provide with your offer. If getting financing, then you will want a Pre-Approval (not pre-qualification) letter to submit with your offer. This shows you are a serious buyer and are have the financials in order to back up your offer.
Good luck with your home search.
Diane Christner, Realtor, GRI, SFR, CNE