Also pls make sure that the title co preparing the paperwork knows and understands the foreclosure process. Title defects are abound these days and unless the title attorney is familiar with them, you might have a big issue down the road. Banks and trustees are overwhelmed these days and it is very easy to miss the right form or a signature. For them it might not mean much but for the future owner of the home whho is going to upgrade it and/or put "sweat equity" into it, it's a big issue. Title insurance will most likely kick in but it's not a fun event. Most of the homes that my clients buy are REOs (it just works out that way) and I've had some properties where in the middle of the buying process, they had to go back to foreclosure auctions because the paperwork was not correct and the title attorney caught it.
Once in a while, the bank will give the buyer an incredible incentive to use their title company. The last time it happend to my client the incentive was close to 2k on 160k home - a good chunk of change. What we did was to go with the seller's title co but made sure that one of my attorney's reviewed the paperwork. Mistakes with titlework, of course, were found but corrected before settlement.
Once again, please make sure that your title attorney is diligent and knowledgeable about bank owned homes.
There are plently of positives when buying REOs as well and I can go on for another 3 paragraphs about those :) Best of luck!