Foreclosure is actually the process that is taken when a homeowner has stopped making payments on their loans and the bank files for foreclosure in the local courts. They have to hire attorneys and the process is not only expensive, but could take not just months but possibly years to complete.
The correct words for a home that has gone through the foreclosure process are Bank Owned or REO (real estate owned) Property.
I guess it is just easier for the population as a whole to call them foreclosures.
The easy answer is life happens. Divorce, death, job loss, illness and more; are life events that can cause a financial strain on anyone.
They are in the business of LENDING money for people to buy homes. So when someone stops making their payments, the logical thing to do is to take it back and sell it to someone else.
Sounds kind of harsh, I know. I make no excuses for any bank, mind you. I have seen way too many instances, where if they (the bank) had been willing to make just one little tweak to their loan, the homeowner could have stayed in the home and continued to make payments. It is a very frustrating system.
One of the alternatives of Foreclosure is a Short Sale, where the homeowner can stay in the home up to the day of closing to a new buyer, possibly saving up their money and moving with a little bit more in their pockets than they would have just walking away.
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