A client asks about buying a foreclosure property from a bank:

You say that "75% of list is possible." That is encouraging. What about 75% of what the bank has tied up in the property? Checking the Fairfax County Tax Records, when looking at REOs, is the amount listed as the last "sale" actually the amount of the note on which the bank foreclosed? The house in Lorton listed below shows the last "sale" at $527,499. 75% of that is just under $400k. Clearly I am reaching :)

Here's how the banks price properties:

They generally start by listing the property slightly below the lowest sale in the neighborhood. If you try making a lowball offer soon after it's listed (within the first 7 days or so), the banks generally have very little flexibility. However, after the property has been listed for 30 or 60 days, the banks become very flexible on the price. The key to getting a bank REO/foreclosure property for substantially under list price is to find properties that have been listed for 30 or 60 plus days.

Since banks are federally chartered, they can only lend based on a multiple of the amount of REO property they have on their books. Therefore, if you time an offer correctly, sometimes banks are willing to practically give property away so they can continue to lend money to their clients.