When you apply for a loan form the bank, you are required to put up a pledge for security for the loan. This is most likely a real estate property whose market value is enough to compensate for the amount of the loan, in the event that you fail to pay back the loan within its term.

When a bank seizes a property, it sends out a notice to the owner. This notice of foreclosure warns or informs the owner that his house or business property will be put up for a public auction at the end of ninety days, after which, the property will become real-estate owned. It will be assigned a value and will be listed in a publicly-available foreclosures list.

The property may be appraised at a much lower price than its current market value. The bank may also bid for the property. If it wins, it will have total ownership of the property and may do anything with it. It can either resell it at a higher price or rent it out. It can also keep it as an additional asset, especially when the property is in a prime district.

Real estate agents and agencies also gain profits from buying and selling properties foreclosed by banks. By buying an undervalued property and then reselling it at its appraised value, vis--vis current market values, an agent can earn thousands of dollars in profits.

If you want to try your hand at this business, visit your local bank and have someone explain to you how buying a foreclosed property works. You may need to know about deed of trust foreclosure, power of sale or judicial foreclosure. But you need not be an expert at real estate laws. There many people, some are housewives and once-a-week agents who have earned a lot from making the buying and selling of foreclosed properties a hobby.