Foreclosure

A legal term referring to the failure of a mortgagee to pay the amounts specified in the terms of the mortgage contract. In foreclosure, legal proceedings often determine that the lender on the property gains control of it, barring a 'foreclosure sale'.

When a homeowner defaults by failing to make payments on his or her mortgage, the bank or financial institution that holds the mortgage note may foreclose on the property. Foreclosure gives the legal ownership of a property to the bank to allow the bank to recoup its investment. Foreclosure proceedings vary by state but usually involve court appearances to ensure the foreclosure is warranted.

Example:

The average foreclosed home sells for 43% less than other homes, according to RealtyTrac.