OK! I Have To Ask This Question!!!
Since I am a newbie to foreclosure investing, I must ask this question based on topics and replys I have studied on this site.....
Is it not better to negotiate a foreclosure when it has reached REO? Since the banks do not want to be in the real estate business, I would assume you would greater bargaining power. Am I way off here?????
Again, I value EVERYONES' exptertise!! 
There are several ways to buy preforeclosure. If the owner has equity get it as cheap as you can to make a win win deal. If there is no equity then approach the bank with a smaller amount than the loan balance (short sale). Some are restricted to a certain discount FHA VA and PMI will get involved if the loan is insured by one of these and they all have different rules. All the HUD and VA homes you see for sale were bought by them because they insured the loans. Even on short sales you may not get enough of a discount to make any money on a resale as they will try to get close to the value of the property. The easiest way is to find equity and deal with the owner and help them move elsewhere and buy their house.
Good LUCK and HAPPY HOLIDAYS
Hope this helps some
Ted Jr