How is "foreclosure" defined in real estate terms?

In real estate, foreclosure is specifically defined as the legal process by which a lender repossesses property due to the borrower's failure to make mortgage payments. When a homeowner defaults on their mortgage obligations, the lender initiates foreclosure proceedings to reclaim the property. This process typically involves filing a lawsuit and can result in the property being sold at auction to recover the outstanding loan balance.

The emphasis on "legal process" is crucial since foreclosure involves court actions and adherence to specific laws designed to protect both the lender's and the borrower's rights. It is not merely a sale at auction but rather a structured, legally governed series of steps aimed at resolving the default situation. Understanding this definition is vital for real estate professionals, as it influences many aspects of property transactions and the market dynamics surrounding distressed properties.