What does foreclosure imply?

Foreclosure specifically refers to the legal process by which a lender takes possession of a property when the borrower defaults on their mortgage loan. This process allows the lender to recover the remaining balance of the loan by selling the property that acts as collateral. In Virginia, as in many other states, foreclosure typically occurs after the borrower fails to make required payments over a certain period, leading to the lender initiating legal proceedings to reclaim the property.

This action is not merely a voluntary sale or an auction; it is a formal legal procedure with specific laws and regulations governing it. While foreclosure can result in a property being sold at auction, the core implication is the bank's repossession due to non-payment, which distinguishes it from voluntary transactions or refinancing methods. Understanding foreclosure is crucial for both buyers and sellers in real estate, particularly in assessing the risks associated with borrowing and the responsibilities of homeownership.