Is this a trustee sale? If it is then you need to pull the Preliminary Title Report from a local Title Company, to make sure there are not any current liens on the property. It is also wise to call the city to get a list of any permits pulled. Check to see that taxes are current, electricity, water, and trash service have been paid. If you are buying an REO property at auction, then make sure that you preview the property before the auction. You are buying "As Is" with no inspection contingency. I also recommend you visit the properties with a licensed contractor. He, or she can help you determine the true picture. On the flipside the added risk of buying a property at auction can lead to a great deal.
Best of Luck!