The discount on a foreclosed property is not as great if the state allows deficiency judgments by lenders against borrowers. In contrast, the discount is larger if the property is being sold in a state that requires foreclosures to proceed through the judicial system. Lastly, appraisals seem to be more accurate for low down payment loans, leading to smaller discounts at foreclosure.

Foreclosed properties may be vacant for a substantial period before they can be sold as the legal process of foreclosure runs its course. During this period, the lender