The first potential buying stage comes after the bank has officially started foreclosure proceedings against the homeowner. At this point, you might be able to negotiate a good deal on some properties, depending on the amount due on the mortgage and the value of the home. Banks are ready to make deals for less than what is owed just to get the property off their hands.
Auction
The second stage comes after the ownership of the property has reverted back to the bank. Now the property is available for sell and is usually put on the auction block. If you're interested in buying from a foreclosure auction, be aware that different stage have different requirements about how the payment for the property works, what forms of payment are accepted, and when the property officially changes hands. Now is a good time to start looking at the auctions because the bids are often lower than what is owed on the property because banks know bidders won't pay such high amounts.
REO
If the auction is a failure and the property is not purchased, the foreclosure home is put on the traditional real estate market to be sold. Although the buying price might be slightly higher, the bank will usually spend some money to make repairs and to fix the place up so they can get top dollar and minimize their losses.
That's a good thing because many foreclosure properties are not left in very good shape after their owners leave them.
