by Denise Gabbard

Created on: May 15, 2009   Last Updated: June 27, 2009

Step Number One: DO NOT Pay for a Foreclosure List! Lots of there sites out there will sell you one for a flat fee or monthly subscription, but there is really no need to pay when bank's lists are readily available for free. (See the bottom of this article for some banking sites you can check out.) Also ask your local banks and credit unions for their lists of REO (real estate owned) properties. These homes have been through the foreclosure sale, and the bank is eager to sell them.

Second, keep in mind as you're perusing these lists, and checking out the properties, that there are some hidden pitfalls to buying a bank-owned property. Here are some tips that can help to make sure your bargain does not turn into a nightmare:

-Budget carefully. Be sure you have extra money set aside for extensive repairs if the house needs it, including paying a crew for labor and materials required.

-Do NOT buy sight unseen. Why would you even consider doing that? The risks are far too great, as many would-be investors have found out.

-Check out the neighborhood. You want to be sure the house isn't in a high crime area, or an area that's been hit particularly hard by foreclosure. Make several trips to the area, including at night, to see what the atmosphere is like.

-Find out how long it's been vacant. Long vacant properties have more damage in most cases. Plumbing seals dry out, pipes can break due to freeze and thaw cycles, sewer gases back up, and bugs that are in the sewer get a chance to get into the house.

-Don't turn on the utilities until you know the condition of the pipes. Besides causing a flood and damage to your walls, you could end up with mold.

-How is the landscaping? Make sure you don't have vines and tree roots growing into the house- they can cause extensive damage that you may not see initially.

-Have an inspection done- the cost is relatively inexpensive, generally between $300-500, and well worth the money. They can save you money in the long run if they can point out damaged pipes or electricity and you take pre-emptive action to get them repaired, as well as give you some additional negotiating room with the lender.

-Consider government owned REO's through HUD. They generally have been winterized and a condition report is done. There is also special financing available to buyers.

-Do not look for quick profits. With the economy and housing market the way it is, you may not be able to "fix and flip" as so many people did in the past. There

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