What is meant by "foreclosure" in real estate?

Foreclosure in real estate refers to a legal process in which a lender takes ownership of a property because the borrower has failed to make the required loan payments. When a homeowner defaults on their mortgage, the lender has the right to initiate foreclosure proceedings to recover the amount owed by taking possession of the property. This process generally involves legal action and can lead to the property being sold at a foreclosure auction to satisfy the outstanding debt.

This definition highlights the lender's role in reclaiming an asset used as collateral for the loan when the borrower can no longer meet the terms of repayment. Understanding foreclosure is critical for real estate professionals, as it impacts property ownership, market dynamics, and potential investment opportunities.