While I'm in the process of negotiating these for myself, I figured I'd share a few key pieces of advice for anyone else hoping to purchase a foreclosure.
1. Sign up for daily listings of REO (real estate owned) property through a licensed real estate agent so that you are among the first to see new listings. Foreclosures are usually priced well and often move very quickly, so if you see something you like, request a showing as soon as possible.
2. If at all possible, bring a professional who can assess the property's condition with you to the first showing so you can avoid surprises if you have an inspection performed later in the process. Most foreclosures are offered in as-is condition, which usually means that in an inspection is done, it is informational rather than something that can be used to further negotiate or request repairs.
3. Do your homework (or have your agent do it for you) ahead of time - know the market value of the home before and after any necessary repairs or updates are completed and what you're willing to pay. Don't be afraid of making a low offer; unlike sellers of other homes on the market, the bank won't be offended. The worst that can happen is they say no!
3. Have a pre-approval letter to submit with your offer, or if you are paying cash, proof of funds. Generally, the fewer contingencies, the more attractive your offer will appear to the bank holding the property.
4. Always get advice from an attorney and have him/her look over all documents and perform a title search... which leads us to
5. Get title insurance and have a title search performed. If you are getting a mortgage, the bank will require this, but buyers and investors often pay cash for foreclosures. If this is the case, it still very important to get title insurance to protect yourself against any defects in the title to the property.
6. Don't get attached! Whether you are looking for a home for yourself or an investment, never get too excited about a property until it's yours. Banks can be unpredictable and even if they have accepted a verbal offer, don't celebrate until it's all in writing. And if it doesn't work out, another one will come along.