What happens when a property goes into foreclosure?

When a property goes into foreclosure, the lender repossesses the property due to non-payment. This occurs after the borrower fails to meet the payment obligations on their mortgage, and the lender has followed legal procedures to reclaim the property. Foreclosure is a process that allows the lender to recover the balance of a loan from a borrower who has stopped making payments.

The lender typically initiates a legal proceeding and demonstrates that the borrower is in default. Once the foreclosure process is completed, the lender takes back the property, and it is often sold at a public auction to recover the loan amount. This action is not just a simple seizure; it involves a series of legal steps to ensure that the lender's rights are respected while adhering to state and federal laws.

The other options do not accurately reflect the foreclosure process. The seller, or borrower, typically does not pay a penalty; instead, they lose their interest in the property. Buyers do not have the ability to negotiate lower payments during a foreclosure because they are not in a position to modify the terms of a defaulted loan. Additionally, properties are required to undergo certain procedures before they can be auctioned, meaning that they are not auctioned without prior notice.