What is "foreclosure" in real estate?

Foreclosure refers to the legal process initiated by a lender when a borrower defaults on their mortgage payments. In this context, the lender seeks to repossess the property that served as collateral for the loan. Once the borrower fails to make the required payments, the lender can legally reclaim the property through foreclosure proceedings, typically culminating in the sale of the property either through public auction or by other means to recover the outstanding debt.

This process ensures that the lender can recoup their investment when the borrower cannot meet their obligations. Typically, the property is sold in an auction where bids are placed, often leading to a sale at a lower price than market value due to the urgency of the transaction. The primary goal of foreclosure is to satisfy the remaining mortgage debt rather than to provide a profit from the sale.

The other options do not accurately describe foreclosure: property renovation relates to improving a property, selling a home at auction might occur during foreclosure but is not the definition of the process itself, and a contractual agreement to sell a property pertains to transactions rather than the specific legal actions involved in foreclosure.