A savvy investor can make money by spending pennies on the dollar for a single-family residence foreclosure. You may want to fix up the homes to resell, establish cash flow by renting the properties or purchase the home yourself. For a business, foreclosed properties can be a great investment.

But don't assume just because a home is a foreclosure that it's a good deal. You have to do your homework in advance. Inspect the property and the title work. Get educated estimates for any improvements.

You should understand the bidding process before you start. For example, Housing and Urban Development only permits sealed bids while lenders may allow open bids. Then get involved in buying properties by doing the following:

1. Research state laws to understand the foreclosure process for a single-family residence foreclosure.

2. Find single-family residence foreclosures through government and realty groups.

3. Talk directly to lenders to find single-family residence foreclosures.

Action Steps
The best contacts and resources to help you get it done

Find single-family residence foreclosure information online

Make sure you understand the legal ins and outs of foreclosures. States vary widely in their foreclosure laws. Some states have sheriff sales, while others require single-family residence foreclosures to go through the court system.

I recommend: Try Realty Trac's comparison of the foreclosure law in different states, including information about who handles the foreclosure, redemption periods and process periods. The United States Foreclosure Law website allows you to click on your state to get legal information by state and even links to the individual states' legislative websites for additional information.

Search for single-family residence foreclosure properties

Once you understand the process, you can begin to look for single-family residence foreclosures in your desired area. You can get information by state, region or by city.

I recommend: Check out HUD homes for sale through BidSource Technologies' BidSelect website. You can search properties online or have e-mail alerts sent directly to your e-mail. Foreclosure Warehouse offers a search for foreclosed properties when you sign up for a seven-day trial membership.

Get your single-family residence foreclosure list directly from lenders

Some states allow lenders to offer foreclosed homes through a private auction rather than a sheriff sale. The rules may differ when you deal directly with the lender; for example, bids may not be required to be sealed and there may not be a beginning bid figure given. In addition, the lender may be willing to work a deal, referred to as a short sale, to avoid a costly foreclosure.

I recommend: Look at Countrywide Home Loans for a single-family residence foreclosure directory. CitiMortgage lists its real-estate owned (REO) homes online by state. Information includes phone numbers to get details about procedures or even arrange a time to look at the house.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  In order to bid on a single-family residence foreclosure through HUD, customers need someone who is licensed in real estate. If you're not licensed, you can hire an agent to work on your behalf. The going rate is three percent of the sales price to the agent.