2. Work with a buyer’s agent. While bank owned properties are listed with real estate agents, these agents are typically just the middlemen and don’t do much negotiating. You are best off retaining your own representation with a buyer’s agent that will do the work for you.

3. Be prepared for extra pain and suffering. The bank isn’t going to pay for anything, or doing anything with the house. Make sure that you have the additional time and energy that is required to deal with a bank owned property.

4. Have some extra cash on hand. Since the bank isn’t going to pay for anything, you should be prepared to pay for some things that you normally wouldn’t have to. (i.e. If you are purchasing a home in a rural setting, you will likely pay for the septic and well to be tested on your own.)

5. Be prepared for delays. If you are going to be moving into the bank owned home after you purchase it, you need to make sure that you don’t cancel the lease on your current home. If you are selling your current home, wait until the bank owned home has closed first if it is at all possible.

6. Read the bank addendums thoroughly. Nearly all banks will require you to agree to additional language that is not part of standard purchase and sale agreements. While this language is not negotiable, you need to know exactly where you stand contractually during the entire process.

7. After you close on the sale, contact your local tax assessor. It is likely that you purchased the bank owned home under the assessed value. If you file with your local tax assessor immediately after the sale you stand a good chance of reducing your property taxes.

The median price for homes dropped to $169,000, a decrease of 14 percent from last year’s first quarter. The median price declined in 134 out of 152 metro areas, with the steepest declines in Fort Myers and Cape Coral in Florida and in San Jose and San Francisco.

Sales of foreclosed bank owned homes and other distressed homes increased in 17 states, compared to last year’s fourth quarter, as first-time home buyers and investors bought foreclosed bank owned homes and other distressed properties. NAR said that foreclosed homes are usually priced at 20 percent below the price levels of other foreclosures homes for sale.

NAR also reported that the inventory of pre-owned houses on the market declined in March to 3.7 million, compared to 3.8 million pre-owned homes in February.

According to data from the Commerce Department, the inventory of new houses for sale dropped to 311,000 units, the lowest count since January 2002.

Brian Bethune, an economist at Massachusetts-based IHS Global Insight, said there are many forces pushing the housing market in opposite directions. Rising affordability and record low mortgage rates are enticing first-time home buyers, but job losses and foreclosures are pushing down home prices to levels that are hurting the housing market.

Total sales for existing homes fell by 6.8 percent compared to last year’s first quarter to 4.59 million housing units in an adjusted yearly rate. Sales, including sales of condos, co-ops and single-family houses, declined by 3.2 percent compared to last year’s fourth quarter.

NAR’s chief economist Lawrence Yun, said that the elements and geographical areas of the housing market show different directions, with short sales, sales of new homes and sales of foreclosed bank owned homes varying in market performance.

Yun has observed that in places with the largest price declines, sales of foreclosed bank owned homes and other distressed properties are also higher, distorting market data.

NAR estimated that sales of pre-owned homes, including foreclosed bank owned homes, will increase to 4.97 million units in 2009 from a total of 4.91 million units last year.

Meanwhile, HUD Secretary Shaun Donovan reported that U.S. banks have $26.6 billion worth of foreclosed bank owned properties as of December 2008, more than twice the figures in December 2007, using data from the Federal Deposit Insurance Corp.