Rapid and sweeping changes in the real estate market are altering the way investors and agents buy and sell properties — especially foreclosures. Increasingly, real estate investors are relying on the Internet to locate, track and ultimately buy and sell real estate.

But real estate investing, like sailing a ship in the open sea, is a science of proved principles and methods. Indeed, navigating the uncharted waters of the foreclosure process can be a perilous journey. Therefore, RealtyTrac has compiled The 7 Lost Secrets of Successful Foreclosure Investing:

SECRET #1: Secure Financing — Step one is obtaining a lender's written pre-approval letter before beginning to shop for a house or condo. Go to a local banker — or an independent mortgage broker — and shop around for the best loan. How much money you can borrow? Being pre-qualified gives you bargaining power when it comes time to writing offers.

SECRET #2: Plot a Course — Chart your course before you set sail. The compass of accurate knowledge should guide you to your desired results. Smart captains plot their course — and stick to it! What are your goals? Do you want to buy one house or 10? Buy and hold or flip? Write a plan before you start writing offers. You need to know where you’re going in order to get there.

SECRET #3: Assemble a Seaworthy Sales Team — Begin your foreclosure adventure by creating a team of real estate professionals that can help you locate, analyze and purchase properties quickly. Your team should include people you trust, including bankers, lawyers, real estate agents, appraisers, title companies, contractors and master craftsmen (painters, carpenters, roofers, electricians and plumbers).

SECRET #4: Research Your Area — Once you have assembled the crew that will join you on your real estate journey, begin researching your target market. Real estate agents call their target market a “farm.” Cultivate your farm by acquiring as much information about your area as possible. Learn what the median sales price is in your farm. Understand the price per square foot. Know how many homes sold in the last 30 days. Expert real estate investors know the answers to these and many other questions. Become an expert.

SECRET #5: Cast Your Net for Foreclosures — Searching for real estate foreclosure bargains begins with research compiled by RealtyTrac. Explore the thousands of bargains at your fingertips by maneuvering through pre-foreclosures and foreclosures — all from the comfort of your home. Narrow down your search to the best deals. Not all foreclosures are good deals. Learn how to spot winner with RealtyTrac.

SECRET #6: Take the Helm and Set Sail — Many real estate investors are plagued by the “paralysis of analysis.” They study a property or a market and become an expert in an area, but they never follow through and write offers. Eventually, the competition spots the deal and a good real estate opportunity evaporates. Don’t get trapped in the “paralysis of analysis.” Move fast. Take the helm and steer. Write offers — low-ball offers. And set a goal to write one regularly — whether that’s one a month, one a week or one a day.

SECRET #7: Calibrate Your Compass — Ask any lawyer, real estate transactions are booby-trapped with unexpected surprises. Learn form your mistakes. Your best work will come after you’ve gone through some choppy waters. Polish your skills to perfection. Read your contracts; then re-read them again. Rely on your team to help navigate around trouble.

Early on in your real estate investing adventure, you will discover that there are no charts to guide you, no lighthouse, no buoys marking the reefs. The rocks and shoals have grounded countless inexperienced investors. Make sure you avoid the wrecks of the past by plotting your successful foreclosure purchase.

In remarks he made yesterday in Chicago, Federal Reserve Board Chairman Ben S. Bernanke talked extensively about how he believes the Federal Reserve Board should respond to rising foreclosures — specifically in the subprime mortgage market.

His conclusion came down in favor of the free market:

"Credit market innovations have expanded opportunities for many households.  Markets can overshoot, but, ultimately, market forces also work to rein in excesses.  For some, the self-correcting pullback may seem too late and too severe.  But I believe that, in the long run, markets are better than regulators at allocating credit."

His conclusion echoes the conclusion this blog came to back in January in a post titled Defaults Drive Subprime Lending Restraint. We cited the story of one subprime lender that was tightening its lending guidelines because of purely market forces — namely it was losing a lot of money because of the high default rate of some of its loans.

Bernanke did not rule out using the powers at the government's disposal — disclosure requirements, rules, guidance combined with supervisory oversight, and informal collaboration with the industry — to prevent "fraud and abusive lending and to ensure that lenders employ sound underwriting practices." But he cautioned that such government intervention should not "inadvertently suppress responsible lending or eliminate refinancing opportunities for subprime borrowers."

Of the four options available, Bernanke touted "effective disclosures" as the best "first line of defense against improper lending." He said the Federal Reserve can impact disclosure requirements through its writing of the regulation implementing the Truth in Lending Act (TILA). Bernanke conceded that implementing rules, which the Home Ownership Equity Protection Act (HOEPA) gives the Federal Reserve the authority to do, may be necessary in some cases as long as the rules are "drawn sharply, with bright lines and address practices that are never, or almost never, legitimate." Less black-and-white practices are more appropriately regulated through supervisory guidance, which the Federal Reserve can draft but only applies to banks and thrift institutions — which are not the institutions most directly affected by the recent subprime shakeout.

Bernanke was not overly optimistic about the near-term future of the housing market, pinpointing the "cooling of the housing market" as a major contributor to the economy's slowdown in 2006. And he predicted "further increases in delinquencies and foreclosures this year and the next as many adjustable-rate loans face interest-rate resets." Still, he ended on a positive note:

"All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system."

Foreclosure activity dipped 1 percent in April after hitting a two-year high in March, but foreclosure filings were still up 62 percent from April 2006, according to the RealtyTrac U.S. Foreclosure Market Report released today.

A total of 147,708 foreclosure filings, which include default notices, auction sale notices and bank repossessions, were reported during the month, a foreclosure rate of one foreclosure filing for every 783 U.S. households.

Nevada documented the highest state foreclosure rate for the fourth month in a row, with one foreclosure filing for every 232 households — more than three times the national average. Colorado came in second with one foreclosure filing for every 314 households.

California reported 30,505 foreclosure filings during the month, the most of any state and up more than 200 percent from April 2006. California's foreclosure rate of one foreclosure filing for every 400 households was the fourth highest state foreclosure rate, and six of the 10 cities with the highest metro foreclosure rates were located in California.

View full report.

After 17 consecutive meetings of raising interest rates, and a switch over to new leadership under Ben Bernanke, the Federal Reserve went into hibernation last August and has remained there ever since. On Wednesday the watchdog of federal monetary policy did what many economists expected it to do and hit the snooze button yet again, deciding to keep the short term federal funds rate at its current level of 5.25 percent.

The recent actions of the Federal Open Market Committee may seem unresponsive to concerns of industries, like real estate, that believe lowering interest rates will help the industry pull itself up by its bootstraps and reverse the current downward trend.

Still, the committee does in fact have one eye open at all times, particularly watching core inflation and economic growth. And apparently committee members are not happy with what they are seeing.

“Economic growth slowed in the first part of this year and the adjustment in the housing sector is ongoing,” the Committee said in a statement released Wednesday. “Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.”

Much of the rhetoric in this most recent FOMC statement is similar to previous statements released since the Fed stopped adjusting rates last year. However, the statement does raise the question, for the first time, of what would happen if inflation does not moderate over time as expected.

At this time the FOMC has no answer to the question. Instead, the agency is leaving it an open-ended question awaiting future information before making further policy decisions.

For real estate professionals, investors and potential home buyers logging onto RealtyTrac, the decision to keep rates at the status quo means that foreclosures should maintain their upward trend for the foreseeable future. With rates remaining at current levels, expect subprime loans to continue their upward adjustments, and many local real estate markets to continue to suffer as prices and sales remain depressed.

Individual property photos are now available for almost every foreclosure property listed on RealtyTrac thanks to a wedding of the company's national foreclosure database with Microsoft Virtual Earth technology. Neighborhood-wide Virtual Earth photos have been available on RealtyTrac since September, but the new photos — dubbed "Rooftop Views" — feature zoomed in and cropped images centered on the subject property.

The Rooftop Views include up to four photos of each property, taken from multiple directions. Thumbnail versions of the photos are displayed on search results pages, and larger versions appear on each property's detail page. The photos allow users to get a good sense of a property's layout, condition and neighbors, all key factors in determining value.

RealtyTrac is the only online real estate site to provide such consistent and close-up photos of foreclosure properties nationwide. The new Rooftop Views represent a huge step forward in convenience for foreclosure buyers and investors, who in the past were forced to accept lack of property photos as an unfortunate fact of life.