Foreclosure

Foreclosure is the legal proceeding in which a bank or other creditor gets the deed on a piece of real property due to the owner default of their promissory note.

In most common law states, there are two sorts of foreclosure: "strict foreclosure," in which the bank claims the title and possession of the property back in full satisfaction of a debt, usually on contract; and the proceeding more generally known as foreclosure, in which the property is exposed to auction by the county sheriff or some other officer of the court. Many states require this latter sort of proceeding in some or all cases of foreclosure, in order to protect any equity the debtor may have in the property, in case the value of the debt being foreclosed on is substantially less than the market value of the property. In this foreclosure, the sheriff then issues a deed to the winning bidder at auction. Banks and other institutional lenders typically bid in the amount of the owed debt at the sale, and if no other buyers step forward they get title to the property in return.

In most jurisdictions it is customary for the foreclosing lender to run a title search of the property and to name all other persons who may have liens on the property, whether by judgment, by contract, or by statute or other law, so that they may appear and assert their interest in the foreclosure litigation.