When negotiating real estate purchases, even REO's, it's a function of what a buyer is willing to pay and what a seller is willing to take (supply & demand). Having said that, with the "stigma" attached, it has been my experience that they sell for less than market value, except for those few opportunities that are truly exceptional, i.e. price, features, location, in which a bidding war may occur. Banks are interested in unloading these non-performing assets within 90 days and have internal procedures in place to facilitate these sales. Good Hunting!