Foreclosed houses, condominiums and multifamily properties that are back on the market in Rhode Island are often priced to move at today’s values, in stark contrast to the many overpriced properties lingering on the market, according to agents who specialize in the foreclosure market, also known as REO — for “real estate owned”— properties.

Bargain-hunters looking for drastically reduced, rock-bottom prices are likely to be disappointed, and not every REO property is reasonably priced. But banks with REO properties on their books are generally motivated to sell them, and unlike many individual owners, they are not emotionally attached to their properties. Ego issues are also less of a factor, so banks are more likely than individual owners to cut their losses and move on, methodically cutting prices until they make a sale, agents said.

Because banks are institutions, price negotiations may take longer than in traditional situations, but many banks are willing to deal.

Because most foreclosed properties were previously owned by people in financial distress, many of them need repairs, from deferred maintenance to more serious issues. For this reason, home inspections are especially important for buyers of foreclosed properties, noted Cathleen Paniccia, of Rhode Island Housing. Paniccia said her agency has provided financing for several first-time buyers who have purchased foreclosed properties this year.

Back taxes and other liens, assessments and fees could also be factors. Paniccia said it is important for buyers to get legal assistance to make sure they understand any documents they sign. “Seek professional guidance,” Paniccia advised. “Work with an attorney to go through the purchase-and-sales agreement.”

Paniccia said if properties need repairs, it might be better for the buyers to wrap those costs into their mortgage loan, and get the work done upfront. There are many loan products that include money for repairs, she said.

The REO moniker refers to the accounting term for foreclosed properties used by the banks that own them. Foreclosed properties are not assets that banks want to hold on to for long. Banks are in the business of lending money, not property management, and not real estate sales, according to Joy Riley, founder and president of Westcott Properties, of Providence.

Riley has been selling REO properties for 17 years in Rhode Island. “The last thing the bank wants to do is have an REO asset,” she said. “They’d much rather have the owner in the property.”

Ed Manfredi, of Abbott Properties, of Warwick, said there “certainly are REOs in better areas or in moderate areas,” but the majority are in urban areas, and there are many distressed properties.

Manfredi and Riley both said the number of multifamily properties for sale in Providence — about 700 this month — represents a stunning glut in the market. Manfredi said he has seen this glut exert a downward pressure on prices in the last few months. One listing, a foreclosure multifamily shell in a neighborhood that had similar properties selling at $150,000 or $160,000 a few months ago, is priced in the 120s, “and I’m having trouble getting 125 for it,” he said.

“In 2003, 2004, you could not get your hands on a multifamily in Providence,” Riley said. She said today’s inventory is “amazing.”

Manfredi said he thinks the inventory of foreclosed properties is still growing. “I don’t think we’ve hit the peak yet,” he said. “Many of the subprime lenders have pulled out of Rhode Island, and many of the lenders who are left are making it more restrictive [for borrowers] … A lot of them are requiring money down.” These stricter lending rules are shrinking the pool of buyers, Manfredi said.

Riley has several upscale foreclosed properties for sale — one, a vacation home in the Cape Cod town of Orleans, has an asking price of $1.3 million. Another of her Massachusetts listings, in the Boston suburb of Framingham, is on the market for $729,900. In Rhode Island as well, foreclosures have occurred in every community, at every price range, she said. “It is across the board,” she said. “…There’s no segment of the market that’s being hit more than any other.”

In Providence, Riley said, the best foreclosure bargains, in her opinion, are a pair of East Side condominiums at 270 Waterman St., near the Whole Foods supermarket. Riley has one of the listings. Both trilevel units for sale, D and E, sold for $579,000 just last year, and both are on the market today at prices of $369,000 and $339,999, she said. Another of Riley’s foreclosure listings, a single-family house at 76 Durham St., in the Elmhurst neighborhood of Providence, sold for $330,000 in 2004, and is now on the market for $305,000.

“There are some great deals,” she said. “There are some great properties.”

Manfredi has a foreclosed house for sale in West Warwick on the market for $185,000. He said it needs updating, and would be good for an owner-occupant who is willing and able to do some of the work. He said the price is not low enough to make it a lucrative prospect for a “flipper,” an investor who would pay workers to update the house, and then pay a Realtor to sell the house, before pocketing a profit. “The numbers just wouldn’t work for a flipper,” he said.

“A lot of the inventory that is on the market today is perhaps overvalued,” said Riley. REO properties are selling because “we’re not selling at the mortgage value,” she said. So many owners who bought or refinanced residential property in 2004 or 2005 obtained loans “when the market was higher …” and they can’t afford to sell at today’s market price, she said. “They can’t afford to compete in the present market.”

“It’s creating quite an interesting marketplace,” she said,

Riley blamed the wide-open lending environment of the early 2000s not only for the increase in foreclosures today, but for virtually erasing the REO property market in 2003 and 2004. Properties that might have ended up in foreclosure in 2003 and 2004 were instead refinanced, she theorized, but finally, all the adjustable-rate, no-money-down, teaser rate, no-income-verification loans created an unsustainable situation. “Then all those adjustable rates kicked in,” she said.

“It’s not a normal market to have no REO,” she said. “… We had [loan] products that never existed before.”

cdunn@projo.com