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.
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.
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.
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.
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