Buyers who know how to find foreclosure listings are enjoying a wonderfully diverse selection of bargain properties. Learn to spot these undervalued houses and you may get an exceptionally good deal on an affordable home.

Millions of properties across the U.S. are now in foreclosure, and many more are added to the inventory each day. Locating them-or distinguishing foreclosure properties from regular listings-is sometimes difficult for those who aren't familiar with the foreclosure game, but they're easy to find if you know how and where to look.

Buying "pre-foreclosure"

First off, it helps to understand that there are different stages of the foreclosure process. Depending upon what phase the property is in, there are various opportunities to bid on it. When foreclosure proceedings start, the initial stage is referred to as "pre-foreclosure." During this stage, which occurs before the property goes to auction, it's possible to negotiate directly with the homeowner. In order to avoid suffering the consequences of ruined credit, homeowners are often willing to sell at a discount. This enables them to use the sales proceeds to pay off the mortgage balance. A buyer may get all or part of the accumulated equity without having to pay for it.

To find pre-foreclosures, scan newspapers and courthouse bulletin boards for legal notices of pending foreclosure auctions, or subscribe to one of numerous newsletters or Internet sites that provide foreclosure data.

Once the auction begins

If the home has already gone to auction, you can find out by contacting auctioneers, or by checking the courthouse notices for its date, time, and location. Show up with cash in hand; then, bid and buy.

Banks and mortgage companies who own the properties also know about them, but unless you have a friend working in the lending institution, it may be hard to get info until after the auction. That's when it's recommended that most novices try to buy a foreclosure anyway, because when homes don't fetch enough at auction, lenders give them to real estate brokers to market and sell just like ordinary listings. These post-auction foreclosures are called REO-real estate owned-and every major lender has its own REO department.

Look for foreclosures and REO properties on the websites of major banks, or visit your local realtor and ask for help in viewing REO listings. Some real estate agents specialize in them, and can show you a wide variety of these listings. REO homes often sell at wholesale prices, but you get to inspect the homes before the sale, and can be represented by a realtor of your own choosing if you want that kind of assistance.

Buying at an auction requires cash, but REO listings can be purchased with an ordinary mortgage, and that can make a huge difference for a buyer. Since the seller of the REO is also a lender, buyers can sometimes negotiate attractive terms and rates for financing handled by the lender/seller.

Published on June 9, 2008