Once you get a notice of foreclosure on your home, you'll need to move immediately if you want to sell before it ends up on the auction block. A foreclosure usually ends with an auction of your home to the highest bidder, but you're still the legal owner until that happens. You have more than one sale option after you receive formal notice of the foreclosure.
Traditional Sale
You can sell your home after receiving a foreclosure notice as long as you find a buyer in time. Foreclosure lengths differ by area and foreclosure type. Judicial foreclosures, done through court, usually take longer than nonjudicial foreclosures. Since an active foreclosure creates a title issue, the legal professionals involved in your deal will contact your lender and arrange to take care of the foreclosure at closing. The lender may require proof of the buyer's ability to finance the transaction before closing because the buyer's money is what will cover your loan debt.
Short Sale
You may sell your house through a short sale after you get a notice of foreclosure if your lender consents to it and you find a buyer in time. In a short sale, you'll sell your house for less than what you owe on your loan, with the lender forgiving the difference. Lenders have varying paperwork requirements and rules for short sales. For example, you might have to prove financial hardship to get sale approval. You'll have to work with a real estate agent and show the house as you would in a traditional sale. Lenders have deadlines for short sales, such as six months. If you don't make the deadline, the lender will proceed with the foreclosure.
Bankruptcy
Filing for bankruptcy temporarily halts a foreclosure action because you get an automatic stay against actions from creditors, including your lender. You can sell your house while you're in bankruptcy as long as you apply for and get permission from the court. The court decides what happens to any money that doesn't belong to your lender after the sale. For example, the court may direct your portion of the proceeds to some of your other creditors because the money becomes part of your bankruptcy case.
Speak to Your Lender
Contact your lender as soon as possible if you're heading toward foreclosure, or already have the notice, if you want to try to sell. Your lender may pause the foreclosure for a period of time to give you a chance to find a buyer because they want to avoid the legal cost of foreclosure. If you wait too long, the lender may be less inclined to work with you. Get any agreement with the lender you reach in writing to protect yourself legally if the lender doesn't do what they're supposed to.
References
- Pine Tree Legal Assistance: Can I Save My Home from Foreclosure?
- Bankruptcy Law Network: Can I Sell My House While I’m In Bankruptcy?
- Skiba Law Group, PLLC: My House While In Bankruptcy?
- Realty Trac: Know Your Options to Stop Foreclosure
- Nolo: How Long Do We Have to Sell Our House Before Foreclosure?
- USA.gov. "Foreclosure." Accessed Feb. 13, 2020.
- Bank of America. "How Much Should You Put Down When Buying a Home?" Accessed Feb. 13, 2020.
- Consumer Financial Protection Bureau. "Determine Your Down Payment." Accessed Feb. 13, 2020.
- U.S. Department of Housing and Urban Development. "Fair Lending: Learn the Facts," Page 57. Accessed Feb. 13, 2020.
- Consumer Financial Protection Bureau. "How Does Foreclosure Work?" Accessed Feb. 13, 2020.
- Cornell Law School Legal Information Institute. "Mortgage." Accessed Feb. 13, 2020.
- National Credit Union Administration. "Personal Loans: Secured vs. Unsecured." Accessed Feb. 13, 2020.
- U.S. Department of Housing and Urban Development. "Foreclosure Process." Accessed Feb. 13, 2020.
- U.S. Department of Housing and Urban Development. "Are You at Risk of Foreclosure and Losing Your Home?" Accessed Feb. 13, 2020.
- New York State Unified Court System. "Common Defenses in a Foreclosure Case." Accessed Feb. 13, 2020.
- California Courts. "Foreclosure." Accessed Feb. 13, 2020.
- California Department of Real Estate. "Cash for Keys"- Information for Consumers and DRE Licensees," Page 1. Accessed Feb. 13, 2020.
- U.S. Department of Housing and Urban Development. "Redemption." Accessed Feb. 13, 2020.
- New York State Unified Court System. "Deficiency Judgments After Foreclosure." Accessed Feb. 13, 2020.
- Experian. "How Does a Foreclosure Affect Credit?" Accessed Feb. 13, 2020.
- U.S. Department of Housing and Urban Development. "Avoiding Foreclosure." Accessed Feb. 13, 2020.
- Consumer Financial Protection Bureau. "If I Can't Pay My Mortgage Loan, What Are My Options?" Accessed Feb. 13, 2020.
- Consumer Financial Protection Bureau. "What Is a Short Sale?" Accessed Feb. 13, 2020.
- Experian. "What Does Deed in Lieu of Foreclosure Mean?" Accessed Feb. 13, 2020.
- Federal Trade Commission. "When Paying the Mortgage Is a Struggle." Accessed Feb. 13, 2020.
Writer Bio
Anna Assad began writing professionally in 1999 and has published several legal articles for various websites. She has an extensive real estate and criminal legal background. She also tutored in English for nearly eight years, attended Buffalo State College for paralegal studies and accounting, and minored in English literature, receiving a Bachelor of Arts.