Should I Buy a Home in Foreclosure?

The long shadow of the housing market crisis doesn’t seem to fade.

Despite government efforts to stem the foreclosure crisis with its mortgage-modification programs, new waves of foreclosures are expected to hit this year. According to RealtyTrac, a foreclosure listing service, between three and 3.5 million homes in the U.S. will go into foreclosure in 2010, up from 2.8 million in 2009. Indeed, May marked the 15th consecutive month where there were more than 300,000 households that received a foreclosure notice. “We’ve plateaued at an unprecedented level of foreclosure activity,” says Rick Sharga, senior vice president of RealtyTrac.

Prospective home buyers have long been cautioned about approaching bank-owned houses, or real-estate owned properties (REOs) as they’re known. These are homes reclaimed by a bank after a foreclosure auction.

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