What does the term "foreclosure" mean in real estate?

The term "foreclosure" refers specifically to the process by which a lender takes ownership of a property due to the borrower’s failure to make the required mortgage payments. In this legal procedure, the lender typically initiates action after a borrower defaults on their loan obligations, which can involve the court system, depending on state laws. This process culminates in the lender acquiring the property, allowing them to sell it to recover the outstanding debt.

Understanding foreclosure is crucial in the context of real estate, as it impacts not only the borrower’s credit and ownership rights but also the wider real estate market by affecting property values and availability. The other definitions, such as the legal process to sell property, loan repayment plans, or types of property insurance, do not capture the essence of how foreclosure operates or its implications within the realm of real estate law.