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What is a Foreclosure?

Foreclosure is a legal process through which a lender or mortgage holder takes ownership of a property due to the borrower’s failure to make mortgage payments as agreed upon in the loan agreement. It is typically initiated when the borrower is significantly behind on payments and has not been able to find a solution to resolve the delinquency.

The foreclosure process begins with the lender filing a legal action, often referred to as a foreclosure, against the borrower. The specific steps and requirements of the foreclosure process can vary depending on the jurisdiction and the terms outlined in the mortgage agreement.

Once the foreclosure process is initiated, the property is usually sold at a public auction to recover the outstanding debt owed by the borrower. If the property fails to sell at the auction, it becomes a “real estate-owned” (REO) property, owned by the lender. The lender can then attempt to sell the property through a real estate agent or other means to recoup their losses.

Foreclosure can have severe financial and legal consequences for the borrower. It can result in the loss of their property, damage to their credit score, and potential difficulties in obtaining future credit or loans. It is generally considered a last resort for lenders when all other attempts to resolve the delinquency have failed.

It’s important for borrowers facing financial difficulties and potential foreclosure to communicate with their lender as soon as possible. By seeking assistance, exploring options such as loan modifications or repayment plans, or considering alternative solutions like selling the property, borrowers may be able to avoid foreclosure or minimise its impact. If you need to save money when selling your property, check out an App such as bRight Agent which can save you a lot of money in real estate agent fees and commission.