When I first entered the real estate business in 1979, at the age of 18 which seems so long ago) foreclosures were a mystery to most people and certainly no one looking for a home to live in looked to buy a foreclosure.  Homes that were being foreclosed upon were advertised in legal newspapers that no one other than some speculators, attorneys and bankers subscribed to basically.  Here in St. Louis I was one of a couple of handfuls of real estate investors that would do the research then go out and try to buy foreclosures to resell.  Today, as a result of the internet which has transformed data, such as foreclosure data, from a rare commodity only available to “insiders” to public information available to the masses, as well as months and months of a record-breaking foreclosure rate, buying a foreclosure has become much more “main-stream”.  Homeowners and investors alike today are looking to foreclosures for a “deal” today.

So, where are the best places to find foreclosure bargains?

You would be hard-pressed to find a metro area in the U.S. that has not seen it’s share of foreclosures, however, there are some markets that, in addition to low priced-foreclosures have good growth in home prices and relatively low unemployment, both of which should create the opportunity for a better return for the buyer.

RealtyTrac, compiled their foreclosure data with data from the National Association of Realtors (NAR) and Bureau of Labor Statistics (BLS) to come up with a list of five of the nation’s metro areas that stand out due to available discounts on purchasing distressed properties and other factors. The five listed below in particular were selected because they offer an average sales price discount of at least 35 percent on foreclosure purchases, positive year-over-year growth in median home prices and relatively low unemployment rates compared to state and national averages.

#1 Memphis, TN
Consisting of Fayette, Shelby and Tipton counties in Tennessee, along with adjacent Crittenden County, Arkansas, and De Soto, Marshall, Tate and Tunica counties in Missouri, the Memphis metropolitan statistical area (MSA) had an estimated population of 1.3 million people as of July 2009, according to the U.S. Census bureau.

More than 3,000 properties sold in the MSA during the first quarter of 2010, with 37 percent of those being foreclosure properties, selling at an average discount of nearly 53 percent, according to RealtyTrac.

On a year-over-year basis, unemployment was up one point in March to slightly above the national average at 10.6 percent, according to the BLS. Despite the unemployment numbers, however, home prices increased 18.5 percent, with the average foreclosure selling for $72,904 during the quarter.

#2 Milwaukee-Waukesha-West Allis, WI
Milwaukee, Ozaukee, Washington and Waukesha counties make up this metropolitan area, home to an estimated 1.56 million people in 2009.

In total, more than 2,200 properties sold during the quarter, with 22 percent of those being foreclosure properties selling at an average savings of nearly 48 percent. The March unemployment rate was below the national average at 9.8 percent, a slight uptick of less than one point from March 2009.

Metro home prices rose during the quarter by 6.8 percent from the previous year, with the average foreclosure property selling for $89,839 during the first quarter.

#3 Buffalo-Niagara Falls, NY
Erie and Niagara counties make up this MSA, which more than 1.1 million people called home in 2009.

Although only 8 percent of the MSA’s total 800 properties sold were foreclosures during the first quarter, they sold at a discount of more than 47 percent. Unemployment in the MSA was well below the national average at 8.6 percent in March, a slight downturn from a year ago.

Another positive factor was the metro’s median home price, which rose 7.5 percent during the quarter from the previous year. Foreclosure properties there sold during the quarter for an average price of $57,191.

#4 Cleveland-Elyria-Mentor, OH
One of the poster children for what went wrong when the real estate market crashed and foreclosures took off in 2007, Cleveland and its surrounding area is making a comeback of sorts.

“Ohio is a good area. A very high-tech environment and strong education and university system,” said Dr. Jay Butler, director of Realty Studies, Morrison School of Management and Agribusiness at Arizona State University.

Home to an estimated 2.1 million people in 2009, the Cleveland MSA is made up of Cuyahoga, Geauga, Lake, Lorain and Medina counties.

Almost 1,000 properties sold during the first quarter, 26 percent of which were foreclosures selling at an average discount of more than 45 percent. Unemployment was virtually on par with the national average in March at 9.8 percent, up marginally from the same month last year.

“I think a lot of people get down on places like Cleveland and Detroit,” Butler said. “They’re overlooking those places. The focus has been on Detroit, but the rest of Michigan is in pretty good shape. Also Mississippi and Georgia, where plants got shuttered, they are now opening. The auto industry is bouncing back.”

Home prices were the big story in Cleveland during the first quarter of the year as they grew 53.8 percent from the first quarter of 2009. The average foreclosure property sold for $71,438 during the quarter.

“If you want to buy and hold for cash flow, then the Midwest — Cleveland, etc. — is the place you can buy for $30,000,” said Phyllis Rockower, founder and president of the Real Estate Investors Club of Los Angeles.

#5 San Francisco-Oakland-Fremont, CA
With 4.3 million residents, this metro area has high California prices, but with big enough discount to justify serious consideration from investors looking for an in-demand market with rock-solid long term prospects.

A good portion of Northern California comprises this metro area, consisting of Alameda, Contra Costa, Marin, San Francisco and San Mateo counties, some of which are “rebounding pretty well,” according to James Gaines, research economist for the Real Estate Center at Texas A&M University.

Forty-five percent of all first quarter home sales in the metro area were foreclosure properties. Selling at a discount of 41 percent, the average foreclosure sold for $327,262.

“When I first started teaching five years ago I did a lot of workshops in California,” said real estate investor and trainer Andy Heller. “Of the active investors living in California, I would estimate that 70 percent were investing out of state. I’ve been doing a lot of workshops in California the last year, and I would estimate that now the active investors have totally flipped. Now they’re investing in-state. They didn’t before because they felt the numbers couldn’t work. Now they do.”

Like all of California, unemployment was up in March in the San Francisco, where joblessness was up almost two points from March 2009 to 11 percent. However, the median home price rose substantially, up 28.9 percent from the first quarter of 2009 to the first quarter of 2010.