What is foreclosure?

Foreclosure is the legal process through which the holder of a lien on real property enforces that lien and has the property sold. The most familiar case is a mortgage or deed of trust, where the borrower agreed at the outset that the property would stand behind the loan; but the mechanism is not limited to lenders, and taxing authorities, associations and other lienholders have their own versions of it.

The process exists because a lien on its own is only a claim. It gives the holder no right to occupy, lease or sell the property, and converting the claim into money requires a proceeding that a court or a trustee conducts under rules the state sets. Foreclosure is the name of that proceeding, and its result — when it runs to the end — is a sale of the property and a distribution of what the sale produces.

Because the whole thing runs through public institutions, most of it is on the public record. The filings, the notices and the eventual sale are documents anybody can read, and that is why foreclosure appears in title searches, in county record systems and in the datasets built from them long after the events themselves.

Which procedure applies depends on the state where the property sits and on the instrument that created the lien. In broad terms there are two. In a judicial foreclosure the holder files a case in court, the case proceeds like other civil litigation, and a judgment authorises a sale conducted under the court's supervision. In a non-judicial foreclosure the security instrument itself contains a power of sale, and a trustee conducts the sale after giving the notices the statute requires, without a case being filed.

The two differ in who supervises, what documents exist, how long the sequence takes and what records it leaves behind. A judicial proceeding produces a court file with a case number; a non-judicial one produces recorded notices and a trustee's deed. Some states use one, some the other, and several use both depending on the instrument.

Neither route is instantaneous, and neither is uniform. Statutory notice periods, publication requirements, service rules and post-sale rights all vary, and they are amended regularly. Nothing on this page states the rule in any particular state, because there is no single national answer to give.

A notice of default is a recorded document stating that the obligation has not been performed as agreed, and in non-judicial states it commonly opens the sequence. A lis pendens — literally, a suit pending — is a recorded notice that litigation affecting the property has been filed; it is a notice rather than a lien, and its function is to put anyone dealing with the property on notice that a case exists.

The sale itself is variously a foreclosure sale, a sheriff's sale or a trustee's sale, and it is conducted as an auction under whatever terms the notice and the statute set. Bidders are typically required to have funds available on the spot or within a very short period, and what is sold is the interest the proceeding reached, not necessarily a clean title.

REO stands for real estate owned, and it is what the property is called after a sale where the lienholder itself ends up owning it — the credit bid was the highest, nobody outbid it, and the asset moves onto the holder's own books. An REO is a conventional sale from that point: an institution owns a property and sells it like any other owner.

Foreclosure is where the priority order recorded against a property does its real work. In general, the foreclosing lien and everything junior to it are extinguished by the sale, while claims senior to it survive and remain attached to the property in the buyer's hands. Which claims fall into which category is a question about the records, and it is answered by reading them in order.

That general statement carries exceptions in every direction. Certain tax and governmental claims commonly survive regardless of when they were recorded. Some jurisdictions preserve rights for a period after the sale. Procedural defects can leave claims in place that everyone expected to be gone. The rules are statutory, they differ, and they are the reason a title search after a foreclosure is read with more care rather than less.

For the same reason, a foreclosure sale is where the difference between a deed and an insured title is most visible. A sheriff's or trustee's deed transfers whatever interest the proceeding reached; it is not itself a representation that nothing else is attached to the property, and the two questions are answered by different documents.

A filing is not a sale. The beginning of a proceeding and its conclusion are separate events with a period of statutory process between them, and cases end for many reasons before reaching a sale. A record showing that a case was opened says that a case was opened and nothing more, which is a distinction that matters to anyone reading county data.

Foreclosure is also not eviction. They are separate proceedings, conducted under different statutes, resolving different questions — one concerns the lien and the ownership of the property, the other concerns possession. They can follow one another, and they are neither the same case nor the same body of law.

And foreclosure is not a statement about what a property is worth. It records that an obligation was not performed as agreed, and it says nothing about the parcel's condition, its rents, its location or what anyone would pay for it. Anyone reading these records for information about a property is reading a legal history, not a valuation.