It’s looking as though this year is on track to top last year for the number of likely foreclosures that are going to occur in the United States. While this is not very good news for the people whose mortage is now months past due, this can be a potentially opportunity for first-time home buyers and people who are looking for housing deals in their particular market.

Since 2009 unsold home inventory, including foreclosed upon properties has been rising. That means that banks now own more and more empty homes on their books. Banks don’t like owning unoccupied houses because that means they aren’t making any money from mortgage or renters and they aren’t making any money from selling the property.

Basic economics dictates that as the supply of homes goes up and the demand for homes remains low or goes down (a high jobless rate means many people don’t have the income to buy a house) then the prices of homes will probably continue to drop in many areas. Up to this point many banks have been reluctant to sell their homes for drastic reductions because there is the overall feeling that housing values will eventually bounce back. But some banks are being pushed to the breaking point where they can no longer afford to simply hold on to a glut of empty houses for much longer.

Remember that whenever you buy a foreclosed home you’re really buying the house from the bank and they need to approve the amount of money you offer. A foreclosure is a previous home loan that’s gone bad, so banks have been much more cautious about loaning out money in recent years. That makes it harder for them to lend out money, but a lack of loans means that more people haven’t been able to buy houses from them. It’s a vicious cycle that we’re only starting to come out of.

There are disadvantages to buying foreclosed homes and it pays to do your homework before jumping into a sale. Since banks are in the business of loaning out money (and not owning homes) you can sometimes work out deals with banks.

Using The Foreclosing Bank As A Lender: Some banks will be more willing to work with you, and may even reduce the price of a property, if you’re willing to apply for a mortgage through them. In a case like that the bank is really winning on two counts: they are removing an empty home from inventory and they are making interest on the money you’re paying in mortgage.

Bargaining With the Foreclosing Bank: Again, banks are in the housing business to make money, not own a lot of property. You’ll need to be flexible and be willing to work with their various departments to navigate through the entire process. Some lenders are not even willing to give out loans for foreclosed properties and some will require that you and the home meet special requirements or go through a lengthy approval process.

Consider All Your Costs: Yes, you can often buy forecloses homes for a much lower price than a regular home sale, but you may have additional costs to consider including buying appliance, housing repairs and additional home inspections. When you’re applying for a home loan to purchase a foreclosed house you’ll need take all these costs into consideration and communicate them with your bank ahead of time.

Home loan rates are expected to slowly rise over the next several years and the inventory of foreclosed homes will eventually shrink back down to pre-recession levels. If you’re looking for a good deal on a home or if you’re a first-time home buyer (and you have plenty of patience) then you may be able to take advantage of the historically low mortgage rates and the high availability of houses to buy your dream home for much less than you ever thought imaginable!