If you want to buy a home, but your budget is limited, you might consider looking at repossessed homes. They often offer a better value because their price is much lower than the actual market value of the property. Many home buyers look into purchasing repossessed homes, and they often compete for those homes with people looking to make a buck in the housing market.

What Are Repossessed Homes and Why Are They So Affordable?

Repossessed homes are also known as foreclosures or real estate-owned homes. These are properties that the lender has taken back when the former homeowner stops paying his or her mortgage. Since the lender loses money on the loan every month it's not getting paid back, they'll often sell these properties for a lower cost in order to get their money back.

Bidding on a Repossessed Home

These homes usually are sold through a public auction, and the highest bidder takes the prize. Often, the bids must be mailed to the seller or real estate agent, so you don't know what the other interested parties are bidding. That means it's important to do a lot of research up front to make sure you put in a bid that is just right – not too high and not so low that you miss out on the property.

One caveat: You purchase a repossessed home "as is," and the former owner sometimes has not taken good care of the property. You should be aware that beyond your investment in the purchase of the home, you might also need to make repairs and improvements to the property to make it livable.