How do I know that a property on the market has been foreclosed on? If it has been, will the banks accept offers much lower than in the asking price?

There are several ways you can tell, but one of the easiest is whether or not the property is occupied. If someone is living in it, it is unlikely that it is a foreclosed property. However, some owners who are about to get foreclosed on, or who are in the process of being foreclosed on, try to do “short sales” whereby the bank issues a discharge of the mortgage by accepting the net proceeds of the sale which is not enough money to pay off the mortgage. More often than not, however, the brokers who advertise the properties will indicate that it is “Bank Owned.” There are generally separate listings that will state that the property is bank owned. The real estate brokers intentionally communicate that information because of the perception that the banks are desperate to get rid of the properties and will take any reasonable offer. The reality is that the banks want to get as much money as they can for the property, but they are under pressure to get it sold so that the property will not become vandalized and to stop the costs of ownership for real estate taxes, utilities, security etc. So, although the banks will price the properties at what they believe is a fair retail price, they will aggressively reduce the price as time goes on in order to get the property sold.