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By Ruth Simon
From The Wall Street Journal Online

Rising interest rates and a cooling housing market are whetting the appetite of real-estate bargain hunters and fueling interest in Web sites that list homes in, or near, foreclosure.

Economists expect delinquencies and foreclosures to increase from today's historically low levels. Nationwide, the percentage of home loans on which payments were past due fell to 4.41% on a seasonally adjusted basis in the first quarter, after rising to 4.70% in the fourth quarter of 2005, according to the Mortgage Bankers Association.

A variety of Web sites have sprung up to cater to home buyers and investors looking to purchase properties in or nearing foreclosure. They include RealtyTrac.com, which ranked seventh among real-estate Web sites in terms of unique visitors in May, according to comScore Media Metrix, a unit of comScore Networks Inc. Foreclosure.com, another popular offering, not only runs its own Web site, but also says it supplies data to more than 200 other Web sites.

You can browse the Web sites at no charge, but getting complete access requires a weekly or monthly fee, typically $40 to $50 a month. The federal government operates its own site, www.homesales.gov, that is free and provides information about foreclosed properties being sold by the Federal Housing Administration, the Veterans Administration and the U.S. Department of Agriculture.

To see how these Web sites work, we checked the government site and three for-profit alternatives, RealtyTrac.com, Foreclosure.com and Foreclosures.com, for listings in one neighborhood near Atlanta. We also looked at the information each Web site provides and talked to real-estate brokers who specialize in foreclosed properties.

We learned that novices should approach the foreclosure process -- and the Web sites that sell foreclosure listings -- with care. Finding a good buy on a foreclosed house requires hard work and can carry significant risks. Critics say that Web sites selling foreclosure listings often contain outdated information or listings on houses that aren't ready for sale; some try to direct would-be buyers to partners with whom they have a financial relationship or to seminars and other products.

"We run into a lot of problems with foreclosure Web sites because a lot of the houses can't be sold" because various legal requirements haven't yet been met or the lender hasn't readied the property for sale, says David Benham, owner of Benham Real Estate Group in Charlotte, N.C., which sells foreclosed homes on behalf of lenders.

Keeping the foreclosure listings up-to-date "is always an issue," says Brad Geisen, chief executive of Foreclosure.com. "Not every owner in foreclosure is going to want to sell their home," he adds. In the early stages, "it is a distress situation that is a possible opportunity." Alexis McGee, president of Foreclosures.com, says her site was created to "accommodate investors." The foreclosure listings "are not listed like [multiple listing service] listings," she adds. "We don't check to see if it's sold."

Investors aren't the only ones who look at foreclosure Web sites. RealtyTrac says about 20% of its subscribers say they are first-time home buyers. The company estimates that another 20% are looking for their next home or for a second home.

The federal government maintains its own inventory of the properties it owns, while for-profit Web sites gather much of their data from public records such as the county recorder, the tax assessor and the county courthouse.

The rules vary from state to state. Typically, properties first appear in the commercial databases when the lender files a foreclosure action with the local court. At this point, the borrower still has options, including working out a payment plan with the lender and selling the property to pay off the debt.

If the problem isn't resolved, the house is put up for auction. Buying at auction can be risky, in part because buyers typically must have cash in hand, can't back out of the sale, have little or no information about the interior of the house and no guarantee that the title to the property is clear.

If the property doesn't change hands at auction, the lender typically turns it over to a real-estate broker specializing in the sale of bank-owned properties, who cleans up the yard and makes repairs before putting the house back on the market. Properties are typically priced "at or just below market value," says Cindy Simpson, a vice president with Harry Norman, Realtors in Atlanta.

The federal government's Web site, www.homesales.gov, has the smallest number of listings because it covers only government-owned properties in the final stage of the foreclosure process. Buyers can search by city and by the size of the house they are looking for. For homes sold by the Department of Housing and Urban Development, listings include a photograph of the house and a detailed report on the property and its condition. HUD says it gives priority to people who want to live in the homes. The federal Web site also includes details about buying a foreclosed home from the government and links to more general information about home buying. For the most part, the site was easy to navigate.

The for-profit Web sites cast a wider net; they begin collecting information when a notice of default is filed. Buyers can search by location and by specific criteria, such as the size of the house and the price range. Unlike the government site, there's no photo and no detailed information about the home's condition. Each of the three sites offers a free seven-day trial; to take advantage of the trial, users generally must provide the sites with their credit-card information. Foreclosure.com charges $9.95 a week for an online subscription, Foreclosures.com charges $49.95 a month and RealtyTrac has a $39.95 monthly fee.

The for-profit Web sites all talk about the large number of properties they feature. Foreclosures.com and Foreclosure.com each say that they have more than 1.2 million listings; RealtyTrac says it has "over 500,000 properties -- updated daily." All three say they update their information regularly.

But even some companies acknowledge that some of the information they offer is out of date. "The most common complaint is either the property is not on the market yet or the property is already gone," says Rick Sharga, a vice president of RealtyTrac Inc. "If there are 1,000 properties in an area you are interested in, there are probably 100 that represent something of a buying opportunity. You might be able to get in touch with 10 of the homeowners and maybe make an offer on one or two."

Figuring out which site has the most accurate information would require checking out hundreds of thousands of listings. But our spot check easily turned up information that was outdated. On Foreclosure.com and Foreclosures.com, for instance, we found a three-bedroom, one-bath home priced at $101,900. Ms. Simpson, the Atlanta broker, told us the house had been under contract for 30 to 45 days.

Then there was the three-bedroom, one-bath home that has been on the market for several months. Foreclosure.com was the only one of the three sites to correctly report that the price had been cut to $145,900. RealtyTrac.com pegged the property's value at roughly $204,000, while Foreclosures.com valued it at $264,000. The Web sites say that such numbers are estimates of market value and aren't a replacement for a formal appraisal.

Foreclosure.com was the only one of the three sites to provide the name of the broker handling the sale of bank-owned properties and contact information for the broker. RealtyTrac, meanwhile, suggested we use a "local specialist" who pays the company a flat fee to be a featured agent for a particular area.

Customers who sign up for the free seven-day trial at RealtyTrac.com automatically have their email address sent to a broker, unless they opt-out. We received an email from our "personal Realtor" within hours of signing up for the service. RealtyTrac also provides links to lenders, credit-score providers, movers and other businesses that pay to advertise on the site.

The other two Web sites also had additional products to sell. Foreclosure.com listings include a link to HomeSmart.com, which pays a fee to be featured on the Web site and sells reports that detail home-purchase risks and estimate property values. The Foreclosures.com site included offers for teleconference calls, home seminars, Web seminars and personal-coaching sessions.

We found some useful information about the foreclosure process on the Web sites, such as the information about state foreclosure laws. But the content on these sites is often mixed with promotional materials.

-- Hannah Kate Kinnersley contributed to this article.