Right now there are a lot of foreclosed homes hanging on the market. According to data complied by DataQuick, almost 40% of existing homes sold in California during the second quarter were foreclosures, which is a huge increase compared to the 5.4% sold in the previous year. CEO for Fannie Mae, Daniel Mudd, remarked that they too are trying hard to sell their foreclosed properties, "I don't think this is a time to be holding onto REOs and hoping for a better day,". Many like to take advantage of the forecloses, such as Steve Dexter, author of ¨Prospering in the Rising Wave of Foreclosures. Dexter says that, "It's the best way to buy, and it's time to buy again,"

There are three stages of foreclosure. The first is pre-foreclosure, where the borrower is delinquent on payments but the home has not been auctioned off yet. Anytime a borrower misses a payment, lenders file notices with the county courthouse. A buyer looking to buy a pre-foreclosure could search for this information and go with their Realtor to the owner directly. Remember in any situation it is best to use a Realtor, they are the ones educated on all the steps involved in buying a home. Of course this is a tough situation as the owners could be offended or angry about these kinds of approaches.

Duane LeGate, president of HouseBuyerNetwork.com, remarked that on the contrary this is not taking advantage as "All many of them want is financial relief from bad mortgages, and you're offering it." This is true with many owners, some of whom are very open to doing a short sale. A short sale is when the buyer pays less for the property then the amount owed by the home owner. To do this, the lender would have to agree to do a short sale and be willing to forgive the debt that would be lost. Some banks are reluctant to do this however, as they take a loss and short sales can involve a lot of paperwork, bargaining, and time. Despite all the negatives, Brad Geisen, the founder of Foreclosure.com feels that many lenders are starting to come around. "It makes a lot more financial sense for them to liquidate early rather than go through the foreclosure process," which can save them a lot of money.

Next in the line of the foreclosure family is Sheriff sales. Default homes are auctioned off at the county courthouse. However, bidders are not allowed to inspect the property and there could be many prior liens against the home. Also, buyers have to have at least 10-20% of the cost in cash, at the moment of buying, and then they must come up with the rest shortly after. It still might not be a sure deal, as it can all fold if the current owner gets enough cash to pay the buyer the same amount as the winning bid.

Lastly, there are post-foreclosures. This is where the lender takes possession of the house and it gets put on the market as an REO (Real Estate Owned) Property, and is listed with a broker. Real Estate agents hunt these listings on a routine bases, as all major lenders normally advertise them on their websites. The home title is also clear, and the property vacant. The listings normally run between 10 and 15% less then the average market value. The REOś can also be bought from an REO auction. At times the bank portfolios the properties and then does a massive clean sweep. The chief operating officer for Williams & Williams, an auction company in Tulsa, Pam McKissick, says that her company normally buys huge amounts of post foreclosures from lenders and then holds massive auctions. Their REOś are normally sold in 30 days, and the bids can be pretty low. McKissick, commented on their procedures, saying that "You want to put a family back into a home quickly and bring the neighborhood back. This does that."