Buyers willing to take a chance on the struggling housing market can purchase a repossessed home for an average of 27 percent less than a similar property not facing foreclosure. According to Realty Trac, which monitors foreclosure activity, in areas of the country hardest hit by the housing slump the discount on bank owned homes can reach up to 60 percent. The company’s senior Vice President Rick Sharga says the majority of foreclosed property buyers are investors with cash or lifelong renters who have been waiting for the right opportunity.

Buyers have a growing list of properties to choose from. Already this year 528 thousand homes have been taken over by lenders. Sharga forecasts more than 1.2 million will be foreclosed on by year’s end. The number is unprecedented. In 2005, before the current financial crisis, the number of bank takeovers was a relatively paltry 100,000 homes. Housing analysts say the flood of home repossessions resulted from inflated prices and lenders who gave mortgages to unqualified borrowers. Once prices stopped rising the house of cards collapsed.

While purchasing a foreclosure might be tempting, some experts warn that the housing industry’s woes are not over. Although the number of homes facing foreclosure in January through June of this year dropped 5 percent compared with the previous six months, don’t uncork the champagne. As explained by Sharga, “It appears that the lenders are artificially delaying the initiation of new foreclosure actions, to manage the inventory of distressed properties on the market.” In other words, banks don’t want to flood the market with more repossessed homes and further drive down prices. Most of the homes being taken over by banks initially cost between $250,000 and $600,000, but according to Sharga repossessions are “creeping into the million dollar range home.”

Prices could take another hit in the next few months when a large number of adjustable rate mortgages readjust. Although interest rates are relativity low historically, Sharga warns that in markets where prices have fallen more than 30 percent there will probably be a spike in foreclosure actions.

If you are still interested in shopping for a bargain, the states with the highest number of foreclosure filings this year are: Nevada, Arizona, Florida and California.