Nationally, the foreclosure rate was recently only 1.27 percent, according to the Mortgage Bankers Association of America. But that rate may be skewed by extremely low foreclosure rates in thriving markets, such as Las Vegas and Los Angeles, where distressed owners may have the option of selling rather than defaulting on their mortgages.

"In stagnant or declining real estate market you are seeing more foreclosures," said Greg Sullivan, Foreclosure.com's vice president of marketing. "You can pretty much draw a line through the middle of the country and see where the foreclosures are."

For example, Wayne County, Michigan (Detroit) recently had an average of 2,081 foreclosed listings in the Foreclosure.com database, of which 677 were added in the second quarter. Cook County, Illinois (Chicago) had an average of 1,124 listings, while Marion County, Indiana (Indianapolis) had an average of 1,097 listings.

In contrast, Riverside County, Calif. had an average of 32 active foreclosure listings during the second quarter. Las Vegas, meanwhile, was one of the top foreclosure markets in 2003, but recently Clark County had only 237 foreclosed listings.

On the heels of a foreclosure

Hard times for some, of course, are considered investment opportunities for others. Real estate investors -- and homebuyers looking for a break -- view the foreclosure market as one big bargain bin.

There are several stages of foreclosure.

The first, pre-closure, is the stage at which the owners have defaulted on their mortgage payments but haven't actually gone through foreclosure proceedings. The site Foreclosures.com charges $79 to access to one county's database of pre-foreclosed property for 20 days. The lists, which are generated from state's first public records of default, are available in Arizona, California, Illinois, Nevada, New Jersey and New York.

Next, the property goes up for public auction, but this phase is too risky for most buyers because there is little time for inspections, and owners sometimes have the right to buy back the property within a certain period of time.

The third stage, post-foreclosure, is the most accessible to individual buyers and the least risky. At this point, the property is either owned by a bank or by a government agency such as the U.S. Department of Housing and Urban Development (HUD).

You can search these listings at Foreclosure.com, which charges a $23.80 monthly subscription after a seven-day free trial. Turnover of these properties is quite fast, according to Sullivan. The average time on the market is about 30 days, though in some places property sells in a matter of days.

The price is right sometimes

In theory, homes owned by banks sell at a discount. These properties are seen as liabilities, so the banks are eager to sell them as quickly as possible.

But it's more common to see prices 10 percent to 20 percent below market value.

"We've seen discounts up to 50 percent off, but those are not the norm," said Sullivan.

Don't let the perception that foreclosed properties are bargains keep you from doing your market research. Compare the price with what the foreclosed owners paid, assuming they bought it recently, as well as similar properties in the neighborhood.

Do keep in mind that foreclosed homes are typically in less-than-perfect shape, say real estate agents.

For one, owners who can't make their mortgage payments usually can't afford to pay for regular upkeep. Many intentionally neglect the house and strip it of all value, including light fixtures, fireplaces and appliances.

"I've even seen people take the pipes from under the sink," said one agent.

In other words, don't expect to walk in and smell fresh cookies in the oven. In fact, there may not even be an oven.   

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