What is "foreclosure" in the context of real estate?

Foreclosure refers specifically to the legal mechanism through which a lender assumes ownership of a property because the borrower has defaulted on their mortgage agreement, failing to meet their loan obligations. This process is crucial in the context of real estate as it allows lenders to recover the remaining balance of a loan by selling the property that secured the loan.

When a borrower fails to make mortgage payments, the lender can initiate foreclosure proceedings, which typically involve a court process or specific legal steps defined by state law. Once the foreclosure process is complete, the lender can take possession of the property, evict the occupants, and sell the property at a foreclosure auction or through another sale process to recoup their losses.

Understanding foreclosure is essential for real estate professionals, as it directly impacts property transactions, market dynamics, and the potential availability of properties for investment.