In a nutshell, when a borrower stops making payments on his home loan, the lender typically sends late notices and requests that the owner get caught up as quickly as possible. After all else fails, the lender will usually turn the case over to their attorney, who will attempt to collect the debt through the foreclosure process.

In Georgia, lenders use "nonjudicial" foreclosure, meaning that the process does not take place in a courtroom. Instead, the debt is advertised in the legal newspaper of the county in which the property is located, and on the first Tuesday of the following month, the house is sold at public outcry to the highest bidder for cash.

Once the property is sold at this auction, there is no opportunity for the borrower to reinstate his loan. Unlike tax sales, there is no "right of redemption" during which the owner can get his house back. The process is relatively quick and final.

The foreclosure process creates three distinct opportunities for real estate bargain hunters.

First, the four-week time period during the legal advertising is referred to as "pre-foreclosure," and presents the largest number of owners who may be highly motivated to sell their homes, simply to avoid a loss at the auction.

Many of these homes are in relatively poor physical condition for the same reason that the owner is facing foreclosure. Some may need only cosmetic work, but more may have serious symptoms of neglect that have been worsening over the years.

As the date of the foreclosure auction approaches, the owners become less concerned about getting paid for their perceived equity in the property and more worried about losing everything at the foreclosure. In many cases, it becomes a race against time as the owner tries to complete a sale in the last week before the sale.

Buying in pre-foreclosure is similar to a traditional purchase. There is usually a written contract, a title exam, an inspection of the property, and a lawyer usually conducts the closing. But because time if of the essence, the period between contract and settlement may be compressed to just a few days.

There is often no time to obtain loan approval for a conventional home loan. So many buyers at this stage make arrangements to purchase the home for all cash, then refinance later after they have completed some level of repairs. A buyer at this stage would be wise to consult an appraiser before agreeing to make the purchase.

The second opportunity for the bargain seeker is at the courthouse steps on the day of the foreclosure auction. By law, all foreclosure auctions are conducted on the first Tuesday of each month, between the hours of 10 a.m. and 4 p.m. Georgia law requires that the auction be conducted on the steps of the courthouse in the county where the property is located, rain or shine.

Typically, the opening bid is made on behalf of the lender in the amount of the debt plus fees and interest. If you are the only bidder, you can purchase the house for any bid in excess of the opening bid, and you may walk away with a true bargain, but there are some catches.

While junior liens such as second mortgages are wiped out at a foreclosure auction, you should know that senior liens survive. In other words, if a second mortgage holder is foreclosing, you may be purchasing the house subject to an existing loan you are not even aware of. And you are also responsible for any unpaid taxes that are owed by the property, no matter how much they may be. Also, IRS liens are converted to a 120-day "right of redemption" during which the government can decide to take the house away from you and refund your purchase price.

That being said, investors literally buy hundreds of homes each month in Georgia at incredible bargains, and the process is worth watching. If you have never seen one, plan now to visit your local county courthouse at midmorning on the first Tuesday of any month. It’s free enterprise at work.

Finally, the foreclosure process creates one additional opportunity for a bargain, and this is one you may want to actually use.

If a home goes to auction and no bidders show up at the right time, then the opening bid from the lender is the winning bid, and ownership of the property is transferred to the lender.

Lenders typically list these homes in "as-is" condition with local Realtors and try to get as much as they can for them. In cases where the homes may need a lot of work, very low offers are the order of the day. Eventually the lender must sell the house, and the price may represent a true bargain for the buyer.

While the foreclosure arena is probably no place for the first-time buyer, it can produce significant bargains for the experienced investor.