I bought some property that was foreclosed just as you described. The bank bought it at the sheriffs sale for what they had in it. I then purchased it from the bank over a year later when they listed it with a realtor at a price they would basically come out whole on, i.e. not lose anything. They had few offers at that price. I started out low and each time they would counter and we finally got to a point where I said "Final offer" which was still at a substantial discount to what they had in it (i.e. what they had bid at the auction). The bank wasn't thrilled but they told the realtor they didn't want to take a chance they would sit on it another year. My estimate is they lost about 40% on the property after fees, etc. This was a few years back. In today's market, there are some great deals written (from the buyer's perspective) but there are a lot of banks who just can't take the hit on their books if they sold ALL of their properties at distress prices.
My point is that I don't think there is a hard-and-fast rule for bank held real estate transactions today. The Detroit Free Press has been running a series on Freddie Mac's & Fannie Mae's role in the foreclosure process. Interesting reading but kind of one-sided, IMO.
Conspiracy? I doubt it. Banks are trying to maximize their return (or minimize their losses) on ALL parts of their operations and I'm sure this is what drives their decision making.
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