With sales of foreclosed homes continuing to drive the residential real-estate market, many prospective homebuyers can’t help but look to bank-owned properties as their best and least costly opportunity to enter the fray.

It’s easy to understand why. Banks and other lending institutions generally price repossessed properties low to unload them as quickly as possible. Then there’s the dream-home factor, in which upscale homes buyers ordinarily couldn’t afford are suddenly priced within reach due to foreclosure.

But bargain shoppers beware: Buying a bank-owned property comes with significant risk, not the least of which being that the homes are often in serious disrepair. Other potential problems could include liens on the property for unpaid taxes or other debt.

What do the experts say about the perils and benefits of buying homes that have already caused previous owners so much heartache? According to two veteran real-estate agents, the first thing to consider is that foreclosures typically occur at the end of long periods of economic distress, during which the owners were unable to maintain the properties.

“Bank-owned homes almost always come ‘as is,” says Robyn Seymour, a broker and Realtor associate with Altera Real Estate in Monarch Beach, Calif. “When the bank takes possession of the property they do an overall assessment and make it secure, but they don’t do much else. I’ve seen listings with no kitchens, no toilets, no counters, no window coverings. Those properties have to be purchased with cash because the banks won’t buy them.”

A property sorely in need of fixing up may still be a bargain; most existing-home purchases come with the need for some repairs. But sometimes a bank-owned property is in such poor condition that the prospective buyer’s best option is to simply walk away. Seymour and other real-estate experts suggest buyers have the home thoroughly checked out by an independent inspector before finalizing the deal.

“Everyone has a right to do an inspection,” says Nate Martinez, co-owner of RE/MAX Professionals in Glendale, Ariz., and immediate past president of the Phoenix Association of Realtors. “What I’m seeing is banks are allowing seven days for buyers to do an inspection. With an independent inspection, buyers will have the knowledge to do one of three things: They can go forward with the purchase, cancel the contract or, possibly, have the bank either adjust the price or make those repairs. The bank is usually not going to adjust the price, but they sometimes will do the repairs so the house will qualify for financing.”

Another potential pitfall, says Seymour, is that the home’s original owners can sue the bank for recovery of the property for up to 24 months after it has been taken. To protect themselves against that and other headaches, buyers should hire a solid, experienced agent.

“The best protection is to use the best real-estate agent you can find,” she says. “The best protection is use the best Realtor they can find. Interview the agent as fiercely as you would a brain surgeon, because we know what we’re doing. We don’t have crystal balls, but we can help you by doing all the title research and getting all the preliminary information out of the way.”

Despite the need for extreme vigilance when buying a bank-owned property, both Seymour and Martinez say there are still plenty of good reasons for considering purchasing a foreclosed home. The best of these, they say, is the plentitude of fantastic real-estate deals on the market today.

“In the Phoenix metro area, foreclosure homes are allowing first-timers to enter the market when they couldn’t afford to just three years ago, when prices were 40- to 50-percent higher,” Martinez says. “You can get a normal 30-year fixed-rate mortgage – loans you can afford. Affordability is at an all-time high. And even with the homes in disrepair, a little ‘sweat equity’ goes a long way right now.”

Seymour cites another good reason for considering a bank-owned property – one of which not everyone may be aware.

“A reason a lot of these homes went into foreclosure is because the sellers took equity lines of credit out to remodel the homes,” she says. “Then, when their mortgages changed terms, they found they could no longer afford it. I’d say one in five of these homes were recently remodeled. You can get these newly remodeled homes at the price of a standard property.”

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