Foreclosure investment happens when a person, group of people, business or organisation puts in money during the public sale of property that had been mortgaged and which has undergone foreclosure for recovery of the loan secured by that property.
When a property owner is unable to pay installments of the loan advanced to him or her against the security provided by the valuation of that particular property, the lender can go to the court to obtain an order terminating the mortgagor's equitable right of redemption.
The foreclosure sale process can be done by the courts (judicial) or by an appointed trustee, which is referred to as statutory foreclosure.
The intention of the sale is to meet the claims of the mortgagee, i.
e.
the lender, while any extra that may be left over goes to the person who had taken the loan and property owner.
While anyone can bid on the property during a foreclosure sale, for all practical purposes, the property lands up in the hands of the lender and usually for the amount of the loan outstanding.
This means that the value of the house or property when reclaimed by the lender may be somewhat or even far less than what the actual market value of that property is - and that is where the interest of the foreclosure investor lies.
There is every possibility that a foreclosure investment in this case can make some quick profits by purchase of the property at depressed rates and then sell at actual market rates within a few months.