Suspicious of REO property $100k below market value

[David Stuart]

Hi guys, this is not for investment. I'm helping my parents buy a new home. This if for living in, no investment. Apologies if these are dumb questions. First time poster and new to the forum and real estate game!

Facts about this property:

• In a fantastic neighborhood in a diverse beach city in SoCal. The city itself is very mixed in terms of quality (think San Pedro, Long Beach, Seal Beach, Huntington Beach, Costa Mesa, etc). It is in a prestigious condo complex. Recent sales in that complex are $600-700k. Surrounding homes are about $900k - 1.2m. Close to country club, 1 block away from fantastic park. 7-8 scores on schools (out of 10).
• Redfin lists it as a regular sale. Zillow lists it as an REO.
• It has been listed for 120 days on Redfin. List price $575k. Redfin estimates value at $565. Zillow "foreclosure estimate" is $620k. Zillow's "home value" estimate is $680K.
• Lots of pictures of the property. It looks dirty, dingy, with dark old shaggy carpets, ugly wallpaper, and old kitchen bathroom.
• According to Zillow, this home was in a foreclosure auction in mid 2016. Bank assumed the debt for $580k. Four months ago the bank listed this property for sale.

I'm scared of pursuing this because:

• I don't mind remodeling or cleaning the place up. But I'm afraid I won't be able to catch some hidden catastrophe like molds, termites or some other thing I don't understand. I assume these REO is sold "as in" with no warranties.
• This listing has been on for a while. Surely other more savvy investors have looked at it and passed. Why did they pass?
• I'm afraid maybe other people know there's a housing crash coming and therefore not excited about this property.

My "fantasy" scenario is that maybe people passed on this property because the pictures looked so bad. Everything looks old and the pictures looked blurry and badly-lit. It almost indicates whoever is in charge of selling doesn't give a fudge.

This is a home my parents would grow old in. So I really want to get this right!

Given my lack of experience, my questions are:

• What are some problems I should look for, given the surprising low price of this property? What are problems that can be detected and what are problems that can never 100% be caught regardless of my due diligence?
• What is best way to do due diligence here?
• If I do want to go forward what do I do? I have a real estate agent I like and TRUST, but he admits he doesn't do many foreclosures. Should I stick with the guy I trust, or get a foreclosure specialist?

Also of course any other advice would be greatly apprecaited!