It is projected that by the end of 2008 there will be more than 2.2 million foreclosures nationwide. According to RealtyTrac, foreclosures have skyrocketed during the first ten months of this year by almost 94%, and if the current trend holds true it's possible that up to 2 million homeowners stand to lose their homes in the next year and a half. Does this create opportunity? Savvy real estate investors have the potential to realize unprecedented profits if they play their cards right by investing in bank owned properties commonly know as Real Estate Owned ("REO").

There are actually three distinct windows of opportunity for house foreclosure investment: pre-foreclosures, foreclosures and bank REO properties. Each has its unique advantages and degree of risk. If you bought the property before it goes to the foreclosure auction, you bought a pre-foreclosure property. If you bought it at an auction, you bought a foreclosure. If no one else buys the property at the auction, the property "reverts" to the lender. It becomes real estate owned, a REO.

Now is the Time to get Into Real Estate

The riskiest home foreclosure investment is the foreclosure. Some of the risk include the fact that you have no real estate agent to lead you through the process at the auction. You have no escrow and no title report, let alone title insurance, so you have no assurance that there are not other liens or loans on the property. You do not have any inspections by contractors, roofers, pest inspectors, building inspections, well or septic system experts. You get no disclosure from the seller as to the condition of the building or what is happening in the neighborhood. And, if you buy an occupied property, you have to evict the former owner, which can drag out for several months.

The second riskiest is the pre-foreclosure. There are several reasons why, including: the possibility of liens on the property that the seller "forgot" to mention or tax liens, and some states have very strict pre-foreclosure laws. For example, if the contacts and the sale are not done according to the law, the seller has the right to rescind the sale and could, long after the sale, sue to have the sale reversed. Buying bank owned, or real estate owned homes is probably the safest house foreclosure investment.

Given the current flood of foreclosures on the market and the lack of potential buyers, REOs are becoming commonplace. And the onslaught of foreclosures is projected to continue through 2009 and possibly into 2010. While lenders often sell these properties "as is" with no warranties, there still are several advantages to buying a REO, including:

• REO properties can offer buyers some unique advantages. Foreclosures owned by banks are usually clear of any liens that may have been recorded against the property, according to RealtyTrac's website. Taxes are generally up-to-date, as well.

• Unlike properties at foreclosure auctions, REOs can be inspected prior to contract and are listed with real estate agents.

• While many foreclosures are often in deplorable condition, REOs are typically restored to at least a readily salable condition by the lending bank.

• The bank or lending institution that owns the property will often offer financing with better deals than they would offer on properties that are simply on the market.

• The bank or lender that owns the property will often provide an allowance for certain repairs.

• You can save money in your title search if you use the same title company that the lender used during foreclosure.

• Many times, because the lender is anxious to get the property off their books, you can buy a REO at less than the current going rate for houses in that area. In some cases these properties are being sold for as much as 30% below the regular market value.

The real estate investing laws are different for each state and are changing all the time. It's important before you begin investing in real estate foreclosures that you understand the real estate laws and procedures in your state.