Have you ever heard of foreclosure? If you don't know what it is, here's an explanation of this process for you!  

What is Foreclosure? 

It is customary to apply for a loan from a bank and become a debtor when you decide to purchase real estate. If the debtor and owner are insolvent, the bank may reclaim the property and sell it by filing a lawsuit. This process is known as foreclosure.

Default

In the USA, depending on the state, three types of documents can be signed which can be the basis of the foreclosure procedure: 

• Mortgage of the house: the property is used as collateral;
• Trust contract: it is a contract that provides for a third party, in addition to the buyer and the creditor, who will hold the legal title;
• Security deed: the creditor retains ownership of the property until the debt is paid in full.

In the event of non-compliance, the bank has the right to start the "judicial seizure" procedure, in which the Court decides whether to sell the property. 

You can also use "extrajudicial foreclosure," which offers other options for handling the situation; some instances include:

• The power of sale: it stipulates that the creditor handles the transaction themselves, bypassing a court trial; 
• The deed of trust: the sale of the asset is entrusted to a third party, a trustee.

Redemption

To avoid the forced sale of the property, if the law allows it, it is possible to resort to "redemption", paying off all debts and paying the costs for the attachment procedure to the bank.