I'm not sure. It depends on how the story is presented and what the author's intention was. Sometimes, stories labeled as possession could be based on real events, but often they are fictional creations.
Yes. The movie draws inspiration from some accounts that were thought to be true. However, in the process of making it into a film, a lot of creative liberties were taken. For example, the way the possession is shown in the movie might be more dramatized than what was originally reported in the real - life events it was based on. But overall, it has its roots in a true story.
Definitely not a true story. Grace: The Possession is part of the horror genre, where creativity and imagination take the lead to craft a suspenseful and terrifying narrative.