I'm speaking from the market I work in and around. In my market, it's called being realistic- not close minded. Let's try not to throw around false assumptions of people whom we do not know, and have a nice clean game.
The market is different wherever you go. The homes I have seen in the D for a few thousand are old abandoned properties, and/or foreclosed properties. If you've been in enough foreclosed properties you'll know that the previous owners or tenants don't always leave the property in excellent condition! The market in Detroit is not great for quick flippers. If you have the ability to purchase these homes now, revamp the neighborhoods, and sit on them until property values return you may do very well. That's an area for a serious investor to research more.
You may be able to pick up a nice house on a tax lien for a few thousand- I don't refute that. I'm just pointing out the fact that usually these properties are not $1,000,000 pristine homes. Realistically, you'll probably have to put in some sweat equity. If you have a network and resources like the great John Beck you might do even better. Chances are though; the average guy watching those infomercials does not have the time, network, or resources. Experts aren't made overnight, but you can get lucky!
REO's are a different matter all together. Banks do not want to sit on these properties, because it costs them a significant amount of money. A $250,000 home could go for $150,000 or less in my market if its bank owned. The banks lose out huge on a sale like that, but they feel it is a better strategy to dump the property instead of sit on it. Many banks work differently, however. Some banks will try to "hold out" for a better offer. Remember- they don't want to lose any more money than they have to.
"...he told me that the banks will have so many more foreclosures on their books by the spring and summer that I will be shocked at how cheaply I can buy them for all cash."
This is the word on the street as I hear it too, Chuck. Of course, this could backfire as buyers hold out till spring for the good deals. If demand suddenly increases you know what happens to price. If the supply is so overwhelmingly huge then price may not be affected.
It all depends on YOUR market. The market you purchase or sell your property in. Like I said, this is how it works in my area.