This is where opportunities arise for buyers to shortcut the years of plodding hard work usually required to own a home or piece of land. If that sounds like your cup of tea, there are a variety of sites that offer foreclosure listing services for prospective buyers. Such sites vary widely, however, in the quality of their information and of their services, as well as in the amount they charged for membership. Realtytrac.com is probably the best site to be found in terms of overall features, accessibility and information quality, but is also among the most expensive at $49.95 a month. Considering the money and time you stand to save by using it though, the difference over the other top sites is virtually negligible – the cheapest of them, foreclosure.net, is only $20 cheaper, but has information rated at roughly half Realtytrac’s quality.

Other sites you might want to take a look at include foreclosure.com, realtystore.com, bargainnetwork.com, foreclosurelistings.com, foreclosuredeals.com and foreclosurefreesearch.com. These sites specialize in different types of foreclosure listings, including preforeclosures, government foreclosures. FSBO’s, Resells, Auctions, Bankruptcies and Tax Liens (foreclosure.com and foreclosurelisting.com are the only sites that have them all). They possess a wide variety of search features and different tools to make the most of your online investment potential.

As with all things done in the virtual world of the web, you should exercise the most extreme caution before committing any money to the posters of online foreclosure listings. With all the publicity that foreclosures have received in the media of late, online foreclosure listings have become a fertile hunting ground for fraudsters out to find someone gullible enough to trust them without requiring the proof of proper documentation. Don’t provide your financial details to anyone without complete verification that they are who they claim to be – if you really plan to invest, you’d best keep a tight hand on your wallet until you’ve seen the home of your dreams in the presence of the seller himself.

Foreclosure is the proceeding in which a lender is granted a court-ordered termination of a borrower’s right of redemption (which is essentially the right to make good on one’s debts). In the case of residential mortgage foreclosures, the mortgagee, usually the bank or some other creditor, attempts to sell or repossess a property that has not been paid for in compliance with the original deed of trust (in other words, the borrower has defaulted on their loan). During this process, the court can grant the borrower a continuance on their right of redemption if the borrower pays the outstanding debt.

‘Acceleration’ is the term used to describe the lender’s legal right to declare the whole debt on the borrower’s mortgage payable at once. Mortgages may also have an acceleration clause calling on the borrower to notify the lender should there be any transfer of lease, title or interest on a property – if they fail to do so, they will be subject to acceleration. For lender’s that have granted mortgages without this clause, there are only two available options: either the lender can wait until all the borrower’s payments come due, or else attempt to convince a court to allow the sale of some portion of that property that roughly equals the amount owed. This is why virtually all mortgages these days have built-in acceleration clauses.

Often borrowers (also called mortgagers) have to pay Private Mortgage Insurance for as long as the amount owed on a mortgage is more than four fifths of the property’s value. In most instances, the PMI in combination with the money from the foreclosure auction will be enough to ensure that the lender will have some significant amount of the loan returned to them. If, however, there is no such insurance, and the lender’s losses will not be covered, the court can enter a deficiency judgment against the mortgager, giving the lender the right to sell other items of the mortgager’s property should the mortgager be unable to pay the difference.

There are several different types of foreclosure, two of which are the most frequently used. These are foreclosure by judicial sale, and foreclosure by power of sale.

The first is essentially the selling of the mortgaged property under court supervision. The proceeds go firstly to pay off the rest of the mortgage, secondly to satisfy debts to any other lenders to whom the borrower is indebted, and lastly (if anything is left) to the borrower.

Power of sale foreclosure, by contrast, calls for the selling of the property, with no court supervision, by the lender, which, due to the lender’s vested interest in the sale, usually proves quicker than judicial foreclosure (though the proceeds are parsed up in exactly the same way).

Another, less widespread form of foreclosure is strict foreclosure, which, if the mortgager fails to pay their debt within the period specified by an initial, post-default court order, grants the lender full title to the property with no obligation to sell it. In centuries past this was the most widespread method of foreclosure, but it has since been confined to cases in which the appraised value of a given property is less than the debt owed on it.

Either of these processes can move quickly or with glacial slowness depending on the state, country or court through which they are directed, and the legal tactics used by each party in attempting to prove its case as the valid one (as has been seen recently in the United States with high numbers of contested foreclosures succeeding due to shortfalls in lenders’ paperwork). Short sales, alternate financing, refinancing or even the declaration of bankruptcy can provide mortgagers with ways to avoid the negative credit-rating implications of a foreclosure.

1. The Short Sale

A short sale, in real-estate terms, is one in which the price at which the house is sold falls short of covering the balance remaining on the borrower’s loan. In most cases of short sale, the bank (or whoever the lender happens to be) approves of a proposed short sale and discounts the balance in light of some financial problem on the borrower’s part, or a slump in the real estate market. Such lenience is, however, not a given, and needs to be explicitly stated in the short sale agreement.

You can count on banks deciding to allow a short sale only if they believe it will result in a smaller financial loss to them than foreclosing (as the carrying costs associated with foreclosure might make foreclosure less favourable). Normally this will be decided after an appraisal has determined the approximate value of the home. Short sales typically go ahead much faster than foreclosures, and are also much more favourable for home owners as they help them avoid the negative effect of a foreclosure on their credit report.

2. Refinancing

If you have an ARM (no, not the limb; the acronym stands for Adjustable Rate Mortgage) or a hybrid ARM that includes the clause that payments will increase after the first couple of years, and if you’re having trouble making the increased payments, you should probably find out if it’s feasible for you to refinance. Refinancing is essentially taking out another mortgage to pay off your loan, and in the above-mentioned case, switching to a fixed-rate loan might be the best thing for you.

Take a look at your original contract, keeping an eye out for prepayment penalties, as many ARMs force borrowers to pay large sums in compensation if they decide to refinance in the first few years. The difference may mean that refinancing is not worth your while, especially if you intend to sell soon. If, on the other hand, it’s your intention to stay put in your abode, refinancing could be the financial boon you’re after.

3. Reinstatement

If you’ve already defaulted on your loan, a reinstatement will involve paying your lender the entire overdue amount, along with any fees or penalties for the late payment, by an agreed-upon date. This is a good avenue to pursue if your payment problems are only temporary.

4. Repayment Plan

Essentially the same as reinstatement, only instead of you paying your lender back in a lump sum, a portion of the money you owe will be added to your normal payments, allowing you to pay off your debt by increments.

5. Forbearance

While this option won’t be much help if you’re living a life above your means, it’s a good option for those whose income has been temporarily reduced – who are, for example, on maternity or disability leave and are soon to return to work and a steady income. In cases like these, the lender may be willing to reduce or even suspend mortgage payments for an agreed-upon time, after which normal payments will resume with the addition of the payment of a lump sum or further partial payments for several months to help bring the loan back up to speed.

6. Filing for bankruptcy

Bankruptcy features last on this list as it’s generally considered the last resort of debt management in avoiding foreclosure. If you and your lender have been unable to agree on any of the above-mentioned solutions, and yet you still have a regular source of income, filing for bankruptcy might help you keep a hold of property, like a mortgaged house or car that you’d otherwise lose. In some cases, courts may approve a repayment plan allowing you to use your future income to pay off debts over a period spanning as much as five years – after which you’ll be discharged of all debts.

While this may sound like a neat option if you’re in a desperate situation, it’s important to keep in mind that bankruptcy can remain on your credit report for up to a decade, making it tougher to buy another home, get life insurance or even apply for a new job.