All three of my houses have been foreclosures. There are good deals out there, but you are going to see a crap ton of junk. Like most things in life, if you want it now, it will cost more. Bank foreclosures can really be a pain with higher risk, therefore lower cost.
Banks are in the money lending business, not the real estate business
The REO officer is a banker, not a realtor
You are negotiating with someone who is trying to make this quarter's books look good, not make a good deal on a house
Let's say someone bought a $200k house, 20% down. The bank loaned $180,000. At 4% over 5 years, the bank pulled in around $28,000 in interest. To the banker trying to clear houses off his books (which he wants to in order to stop his holding costs), he only needs to recoup $152,000. He is not concerned about the fact that other houses in that neighborhood are now worth $225,000, he is concerned about the $152,000 and the liability of holding a house.
**After reading this again, my math is way off, but the principle is sound and I don't feel like fixing it**