Readers suggested a topic on foreclosed homes that have been taken back by the lenders. "If anyone knows, share approximately what a bank with REO’s wants to hear (and what they do not want to hear).. along the lines of: 'Mr. Banker, you and i both know those properties are depreciating fast and will eventually reach 1998 price levels, so let’s cut to the chase and deal now.'"

One replied, "The problem is that Mr. Banker will never sell at the price you both know is reasonable because he is waiting for (and may still get) the greater fool. As soon as the banks start to sell for reasonable prices; in a word, the gig is up. The comps will adjust to what the market will support (and no, a market will obviously NOT support the prices if you have a 60 month inventory; ala Palm Beach) and the banks will take the losses."

"Unfortunately, the banks have little incentive to blow out their repoed properties; it will just decrease the values of the homes they are going to repo next week right down the street. However, how long with the bank’s investors allow them to keep a huge amount of RE on the books?"

Another said, "From time to time, I look at the REOs listed on line by various banks and other institutions. Usually, the contact is a local realtor in the area. The realtor who handles REO for one of the banks in this area (Tampa Bay) is very realistic. I had a conversation with her a few months back and she said that the bank she deals with has not yet adjusted to the reality of the bust and so the REOs are priced high."

"Realtors who deal with repossessed property have a much different view of the market. They’ve been through it all and seen it all: the trashing of the property, squatters, stolen appliances and wiring, etc. My experience is that you can have a frank conversation with them. They will present your offer to the bank and will do the talking for you. They just have a hard time convincing the bank that the POS REO ain’t worth what the bank thinks it is worth."

One was skeptical. "The banks consider 'a good enough deal' to be a price fairly close to what is owed to them when in reality (because loans were offered close or above 100% LTV) the market price is well below this price point."

"The banks are refusing to feel the pain and are putting off the day of reckoning. I say screw the banks. Understand that there IS a cost of holding REO’s. Taxes, Assoc fees, maintenance to name but a few. Let these suckers let these languish through the summer and watch the maintenance issues mount."

"Anyone buying right now is completely clueless on how bad this is going to get and how far prices are going to fall."

The Modesto Bee. "Another home foreclosure auction is headed to Modesto, and it's got potential bidders hankering for a bargain. The next big auction (is) scheduled by Hudson & Marshall for July 19 at Modesto Centre Plaza."

"And more auctions are expected to be held later this summer and fall. That's because lending institutions have repossessed thousands of Northern San Joaquin Valley homes, and they're eager to sell them any way they can."

"'It's definitely a buyer's market and everything's on sale right now,' said Ken David Elving, co-owner of Matel Realtors. He is representing the sellers of five homes that will be auctioned July 19 in Modesto."

"To determine a home's value, Elving said, don't rely on what homes sold for in the past because prices have been falling very quickly. 'Focus on the prices being asked for homes for sale now,' Elving said."

"Current asking prices often are substantially less than previous sales prices for identical homes. Example: Elving said a home in the July 19 auction in Oakdale sold in May 2006 for about $550,000. By this spring, that 2,784 square-foot home was back on the market for $394,000. No one bought it, so now it will go to the highest bidder."

"A search of properties for sale in that neighborhood shows several slightly larger homes priced about $360,000. So that $360,000 price may be a more logical bid than $550,000."

"It can be easy to get caught up in the excitement of competing to buy a home. Auctioneers are good at getting buyers to up their bids. 'Set your limit and don't get swept away by the moment, because you may find yourself bidding more than the property is worth,' cautioned Catherine Cooper, a Modesto real estate broker who attended last month's auction."

"Cooper thought many of the bid prices at that auction were too high. By the time the 5 percent buyer's premium was paid, many of last month's auction prices were full-market value, agreed Jason Rivers of Rivers Realty, who also was at the event."

"'Those buyers didn't get any better deals than you can find right now with regular houses listed for sale,' Rivers said. He is representing banks that have foreclosed on about 20 properties, he said, and those sellers are offering good deals."

"Foreclosed houses can have construction problems that inexperienced buyers may not spot, said Matthew Irion, owner of M.K.I. Home Inspections in Modesto. 'I've been doing some inspections on bank repossessions, and they've been in pretty bad shape,' Irion said. He's seen walls kicked in, appliances removed and recyclable metals such as copper, steel and brass pulled out."

"Irion said bidders would be wise to arrange for home inspections before committing themselves to buy."

"Many newer homes are in special taxing districts that require owners to pay additional property taxes each year. Such Mello Roos fees or community service district fees can add thousands of dollars a year to the cost of a home."

"Few investors are able to buy homes, then immediately rent them out for a profit. 'The rental market is soft right now,' Elving said. 'You have to offer very aggressive rental rates to get homes rented. If your price is above $1,000 (rent per month), you're in trouble.'"

"A couple of years ago, many investors made big bucks buying fixer-upper homes that needed relatively minor remodeling. Flipping a house...works great when the real estate market is hot. Not now. 'Flipping is financial suicide now,' Elving warned."

"That's because buyers these days expect bargain prices, and they no longer have to pay extra for homes in great condition."