What is meant by "foreclosure" in real estate?

Foreclosure refers specifically to the legal process that occurs when a lender seeks to recover the balance of a loan from a borrower who has stopped making payments. This process allows the lender to take possession of the property used as collateral for the loan. When a borrower defaults on their mortgage, the lender can initiate foreclosure, which typically involves a series of legal steps to ensure that they can reclaim the property and ultimately sell it to recoup their financial losses.

Understanding this process is crucial in real estate, as it not only affects the borrower facing financial difficulties but also has implications for the housing market, property values, and potential buyers looking for foreclosed properties.