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2006 saw more than a 50% rise in the number of homes going into foreclosure and, as the recent housing boom finally goes bust, 2007 and 2008 have followed with more of the same.

The reason?

Easy, interest-only payments or adjustable rate mortgages (ARM) made the first years of home ownership possible for almost anyone. Relaxed credit checks and income requirements allowed many of the eager buyers to borrow more than they thought possible. For some new home owners, the dream house cost more than they really could afford.

Job losses, predatory lenders, high credit card debt, a sluggish real estate outlook, and high heating bills continue to plague consumers as their options dwindle. In the present economy, refinancing or selling a house in a soft market becomes far less viable.

This is when once-happy homeowners in large numbers begin go into default on mortgage loans. However, one's misfortune can be anothers dream opportunity, meaning 25% - 50% savings for careful buyers in the foreclosure investment market.

But be forewarned: foreclosures are not as easy as stepping in and getting a "steal" on a prime property.

Foreclosure Stages

Of the three stages of foreclosure that investors are keenly aware of the first is known as pre-foreclosure. This is when owners first begin to default on their mortgage, a listing of which is usually kept on file at the local town courthouse.

At this point, buyers may gather up the information and contact owners directly to enter into negotiations, and perhaps work out a mutually beneficial deal with the financially-strapped seller.

The second stage is when the owner actually defaults on the mortgage loan and the house goes up for public auction.

However, the former owner is no longer required to disclose any problems, so the bidder who "wins" the auction may ultimately be stuck with costly repairs or back taxes that undermine any savings to be had. The bidding process can be fraught with other surprises, too, including owners who may arrange refinancing to save their homes from the auction block at the very last minute. Or winning bidders who find out too late that some auction houses may require them to pay up in cash only - within 24 hours - or lose the bid.

Foreclosures - Gambling on a Great Deal

In short, buying foreclosed homes at auction can mean risky business for the novice.

Leaving less to chance, some buyers may go after "orphan" houses that may fail to move at auction altogether. These properties usually revert back to the lender, when it is reclassified as an REO, or real estate owned.

Banks are usually anxious to sell an unoccupied REO for fear it will quickly depreciate, so some lenders may be open to negotiating with an interested buyer willing to pay the auction bid.

For the best foreclosure deals in less upscale neighborhoods, experts also advise keeping a watch on government auctions sponsored by such agencies as HUD, Fannie Mae, Freddie Mac, or the Veteran's Administration.

Elsewhere on the Web, find out more about the ins and outs of foreclosure buying, where to find the best deals, along with more expert tips and facts you'll need on hand when entering the sometimes risky but often very profitable real estate foreclosure investment market ....

Foreclosures Real Estate Foreclosure Listings and Homes at RealtyTrac - A top U.S. foreclosure specialist site offering a great education on the foreclosure market, plus available listings browseable by U.S. state map or extensive searchable database. Includes a market overview, FAQ, foreclosure how to's, a list of bank foreclosure laws by state, related news.

Real Estate for Sale, Government Surplus and Foreclosures : FirstGov.gov - Browse the online map or search the database for commercial real estate, farms & ranches or single family homes for sale by the U.S. government. Also check out information on surplus property sales by state or local area.

Homes for Sale - HUD - Listings from several U.S. federal agencies with links to single or multiple family homes on auction from the IRS, U.S. Customs, FDIC and more.

Real Estate Foreclosure Facts - About.com guide to the topic covering how to buy a foreclosure, information on related auctions, plus more on how to avoid foreclosure for homeowners.

General Foreclosure Talk - Online forum with discussions on foreclosures, pre-foreclosures, related financing, software, title searches, legal issues and more.

Foreclosures, Short Sales, Tax Foreclosures, Tax Liens Forums - More active discussions on repossessions, auctions & foreclosures, short sales, tax lien certificates & related issues.

Foreclosure University - The 10-minute online course to get you up to speed on the foreclosure market with free tutorials, flowcharts & the latest foreclosure news.

also in see in Home Legal Guide -> How to Avoid Foreclosure

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