In some parts of the country, it's much easier to land a good foreclosure deal than in others. In the Palm Bay, Fla., metro area, for example, buyers have plenty of foreclosed homes to choose from and pay an average of 28 percent less for repossessed homes than in conventional sales, according to RealtyTrac, an online marketer of foreclosed homes. Last year, nearly 24 percent of all sales were foreclosures.
"The challenge of the 2013 market, for many cities, is a lack of [foreclosure] inventory," said Daren Blomquist, RealtyTrac's vice president. "The best places to buy are where a lot of homes will become available."
Many foreclosures have been in limbo since fall 2010 following the so-called robo-signing scandal, when banks allowed employees to sign off on thousands of foreclosure documents a month with little verification. The backlog in foreclosures had become particularly bad in judicial states like Florida and Illinois, where judges must approve the paperwork. But after a massive foreclosure abuse settlement was reached between the state attorneys general and the nation's five biggest lenders, foreclosure processing has picked up again in those states.
The rebound in housing markets -- gains in existing home sales, new home sales and home prices -- has added strength to the case for buying foreclosures. Now that home prices are starting to stabilize, buying a foreclosed home isn't as risky as it was a few years ago. "The underlying fundamentals in many of those [top] markets are slowly improving, making it an opportune time to absorb additional foreclosure inventory this year," Blomquist said.
Yet, not every bargain basement foreclosure is a good deal. Many are sold as-is and come with issues. Get the home inspected and have the heating, air conditioning, electrical and plumbing, as well as the structural integrity checked out before you sign a contract. Also, analyze the neighborhood carefully and check out local crime rates. When there are a lot of foreclosures in one place they can drag down the home values around them.