Buy a Foreclosed Home And Save Big!

VIDEO: The ins and outs of foreclosure purchases.

How would you like to knock tens of thousands of dollars off the price when you buy a home? You can do just that if you buy a foreclosed property.

Last year, across the country, houses that had been through foreclosure sold for an average of 28 percent less than other houses. But there are perils and pitfalls you need to know about.

Click HERE for more advice on buying foreclosed homes.

Click HERE for a list of the 10 states with the deepest discounts on foreclosed homes.

Click HERE to learn how to find foreclosures in your area.

"GMA" did the math for you. The median home price in America is about $160,000, so if you get that 28 percent discount, that's a savings of nearly $45,000.

Here's how it works:

"Auctioned on the courthouse steps." It's a phrase you've heard, but a sight most haven't seen.

Banks are required to go through an auction to repossess a house from the owners. And the general public can bid, too.

"You can do it," Paul Cooper of Alex Cooper Auctioneers, told "Good Morning America." "It's possible. It's just you have to do your homework before you come to my sale and bid."

And it's hard homework at this stage because:

You can't get inside to see the house.

You have to bring a 5 to 10 percent down payment.

It's tough to get a mortgage for a property, sight unseen.

And if you do make the winning bid, you may have to evict the current residents.

At a recent Montgomery County, Md., auction the crowd wasn't biting, so the bank was the only bidder paying roughly what it was owed.

Buying From The Bank

The courthouse steps are not the only place to buy a foreclosed home. So often the bank buys the property back, and that actually opens up a whole new opportunity.

For example, one cute Washington, D.C., duplex is now bank-owned once more. You can actually hire an agent and take a tour.

"It's substantially less risky than the courthouse steps process," said Dale Mattison of The Mattison Group.

The stereotypical foreclosure property has been neglected, even trashed, but there's a flip side. Banks often invest in things like new paint, carpets and appliances before putting a house on the market.

"So the bank recoups a little more money and the new home buyer gets a property that's fresh and they don't have to do a whole lot to it," Mattison added.

Sometimes the bank selling the house will even offer you a mortgage. But it's not all rosy: big banks are notorious for taking a long time to decide on your offer, then making you meet rapid deadlines.

"It's gotten a lot better. It's cleaned up. The process is a lot smoother than it was, I'd say, two to three years ago with bank-owned properties," Christa Hodge of Long and Foster Realty told "GMA."

Single Dad Achieves Dream

Hodge found one bank-owned home in Maryland for her brother, James Glavas, a single dad. All it needs is cosmetic work.

The house last sold for $300,000 in 2005 – way out of reach for Glavas.

"When I first moved out here from Dallas, I was like, how will I ever be able to afford a home and live the American dream like everybody else?" he said.

But now he's snagged it for $175,000. That's $100,000 less than nearby houses that haven't been through foreclosure.

"I'm going to be able to own a home at the same price that I'm renting at now, so that's a beautiful thing," Glavas added.

Real estate agents say it's the cycle of life. Yes, some people lost their homes, but now a whole new group can afford to buy.

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