We closed on a Citigroup (managed by Premier Asset Services) REO last November after about 8 months and surveying over 60 homes personally. My best advice is to work with an aggressive technology-savvy Realtor who specializes in foreclosure/short sale properties.
In our case, we offered the bank about 10% under their asking, a price which our data supported, and they accepted within 3 days, without counter, and also covered 3K of our closing (actually, my wife bought the house) costs and all of the termite repairs/certification. A slightly smaller arm's-length (non-REO) home across the street sold for about 15% more in mid-December.
While looking, I got so good at spotting potential REO's that I was giving our agent head's up on what was coming down the pike. The house next to my mom's was REO'd for over a year and sold for 1/3 of the price it had sold for at the market top. The houses on both sides of us (rural residential) are both foreclosed and empty. CenCal real estate is a nightmare or an opportunity, depending on your POV.
IMO, it helps to have a clear understanding of construction, systems and neighborhood demographics in order to make quick and informed decisions. REO's aren't for everyone, especially in this marketplace where there is a lot of anger and despair. I've seen plenty of it taken out on homes.
Good luck!
Pat
