Bank owned or REO properties depend on the particular lender
What is right amount to offer? First, lenders are all different. Some deal and others do not. You have to know in your market the various banks and mortgage companies; each has its own personality. This is why you need an experienced agent. Larger banks generally will negotiate more, smaller ones will not. Investment companies are the best negotiators, they buy up quantities of properties, they are not conservative by nature, they like to deal.
Time on the market
Also, it depends on the length of time a property is on the market. The longer it's been on the market, the more likely a bank or investment company will accept a lower offer.
How good is your agent?
Whether you can get a good deal on a foreclosure property depends on how good your agent is. You want someone who knows the players in the foreclosure market, who knows how to get information, and who is very aggressive in negotiations. And someone who grasps an opportunity, some change in a situation that can give the buyer an advantage.
Low-ball offers
An agent will do a Comparable Market Analysis (CMA) on a property. This provides you a good idea of the value of the home. A low-ball offer below the CMA range will not be considered by a bank, often they will not even call an agent back.
About short sales
The problem with a short sale is that the bank or mortgage company has to approve the deal. Banks will have a formula they use that will mitigate their loss. Once again you will need an agent who can talk to the seller's agent to find out as much info on what the bank's situation is with the property.
The quality of the selling agent is an issue too. If the individual does not follow through passing on the offer, amendments and queries, the chances of a sale are diminished.
Today's market after the end of the first-time home buyer's tax credit is a buyer's market, prices are declining. So in general the situation is very favorable for a buyer of foreclosure properties. But there is no easy formula here except perhaps this:
Get Yourself a Good, Experienced Agent.
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