Since the recession began a few years back and the property market hit a slump, we've all heard The F Word used a lot-that's right, foreclosure. A foreclosed property is a house that was once owned by a person or family, but was turned back over to the mortgage holder when that person or family defaulted on their home loan payments. Over the last couple of years, there has been a large increase in the number of foreclosure property sales, which may sound like a bad thing. In reality, foreclosure sales are good for everyone. A foreclosure sale means a debt has been largely paid off, and a new owner can come into the house and breathe new life into the property. Better yet, a foreclosed house often sells at up to 25% below the market value of the home, which means savings for a buyer that can then afford to renovate and upgrade. If you're thinking about buying a foreclosed home, here are some things to keep in mind.

Watch Out for Auctions and Current Owners

Houses sold at foreclosure auctions often seem too good to be true, and that's because they are. Seasoned home buyers and newcomers alike often have trouble after buying a house at a foreclosure auction, primarily because homes are not viewable before the auction, which means prospective buyers can't check the house for potential structural or maintenance-related issues. Add to that the risk of purchasing a house with outstanding taxes owed, and you've got yourself a risky situation that could present some issues once the sale has gone through. The homeowner may still be living on the property, as well, and it would be up to the new homeowner to evict them, which could result in a trashed, vandalized house once the jilted ex-owner has vacated.

Buying From a Bank Is a Safer Option

Rather than worrying about auctions or dealing with current homeowners, look for houses that are listed as being owned by a bank or "REO," which means "real-estate owned." Buying a house in this fashion ensures there won't be any hidden back taxes to pay off, nor will there be anyone in the home that you have to kick out before you move in. As an added bonus, you can check the place out before you make an offer, which means you'll know the extent of any issues the house may have.

Prepare to Save, Then Spend

Foreclosures tend to sell for less than market value because, simply put, if the owner couldn't pay their mortgage, they generally can't afford to keep up with maintenance on the house. While this can save you money on the purchase of the house, consider the money you might have to spend in the future. There may be plumbing, electrical, or even structural issues with the house that need to be taken care of immediately. They say there's no such thing as a free lunch; buying a foreclosure is a little bit like getting a free appetizer before your expensive filet mignon arrives!

All in all, it pays to keep your wits about you when buying a foreclosed home. These houses may seem like a bargain-and oftentimes are-but they will need work done to get them to a place where they feel like a dream home. Now is the time to snap up houses like these, but make sure you proceed with caution before you spend your hard-earned cash on something that could be more trouble than it's worth.

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