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What is Foreclosure?
The situation of foreclosure arises when the owner of some real property piece who had borrowed money for the same fails to pay the monthly mortgage due to insufficient funds. The agreed terms while loaning before the purchase was to use the property as security for the loan and a mortgagor's failure in meeting the contract results in foreclosure.
Lenders do not issue mortgages rather just, use the same as a security for their money. Various situations can lead to foreclosure, the most common being when lenders adjust the rate of mortgage to make it appear appealing more than its true worth. But once the interest rates are high, the owners would fail to keep abreast with the monthly mortgage. Similarly various other situations exist for which the owner can not be blamed but foreclosure is imminent.
The lender or the bank sends notices for the skipped payments to the mortgagee before the foreclosure phase and then, the office of the county clerk is contacted to file papers for foreclosure if the mortgage payment is still due. Next step in foreclosure is scheduling the house for a public auction.
The lender is the first bidder and can bid at a price lower than the market value of the property. If his bid is the highest, he is the new owner of the property and the bank would allow that as they are more interested in getting back their money rather than invest in real estate.
Buying a foreclosure or bidding on it requires due diligence and information on foreclosures in your neighborhood can be collected from various sources including newspaper, internet etc.s.