Need guidance to decide offer price...

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I live in Southern California holding a white-collar job. I cannot afford any houses on the market and now I want to try properties in pre-foreclosure.

I have signed up for Realtytrac and need guidance on the offer price. Should I use the loan amount owed to the bank or the market value to decide my offer price? For example, a property I saw had estimated market value of $800K. The owner still owes the bank $405K. Should I approach the owner with....say $440K (10% above loan amount) or $720 (10% below market value) ?

I am new to dealing with pre-foreclosure. Any advise is very much appreciated. Thanks!

max